Capital essentially reflects how market views the firm risk

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Reference no: EM131559015

Which of the following statements regarding cost of capital is incorrect?

A. Cost of capital essentially reflects how the market views the firm’s risk.

B. The overall cost of capital that covers the firm's costs of equity, preferred stock, and after-tax debt is called the weighted average cost of capital (WACC).

C. The return that lenders (bondholders) require on their loaned funds to the firm is the cost of debt.

D. For the weights of the capital structure components, firms typically use the proportions of the book value, not the market value, of debt, common stock, and preferred stock.

Reference no: EM131559015

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