Question

The __________ for a given investment is the minimum risk-adjusted return required by the shareholders of the firm for undertaking that investment. a) cost of equity capital b) systematic risk c) all-equity beta d) weighted average cost of capital

Answer 1

Answer:

a) cost of equity capital

Explanation:

A investor demand the rate of return based on the risk involved in a particular investment. The shareholders invest in the equity of the firm, the required rate of return of shareholders is the cost of equity capital. As the firm is more risky the cost of equity capital will be higher and less risky have lower cost of equity capital.