GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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In case the finn is all equity financed, WACC would be equal to
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Cost of Equity
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Cost of Debt
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Both (a) and (b)
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None of these
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Explanation:
Detailed explanation-1: -If the firm is fully equity financed, WACC would be equal to cost of equity as there is no other source of funding.
Detailed explanation-2: -If a company primarily uses debt financing, for instance, then its WACC will be closer to its cost of debt than its cost of equity.
Detailed explanation-3: -Equity financing refers to the sale of company shares in order to raise capital. Investors who purchase the shares are also purchasing ownership rights to the company. Equity financing can refer to the sale of all equity instruments, such as common stock, preferred shares, share warrants, etc.
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