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20 December, 04:42

Which one of the following represents the minimum rate of return a firm must earn on its assets if it is to maintain the current value of its securities?

A. Pretax cost of debt

B. Weighted average cost of capital

C. Cost of equity

D. Aftertax cost of debt

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Answers (1)
  1. 20 December, 06:41
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    B. Weighted average cost of capital

    Explanation:

    The Weighted average cost of capital is abbreviated as the WACC. It is the weighted average of cost of common equity, cost of preferred equity and aftertax cost of debt. For a company to have a breakeven in returns, they need to earn a minimum rate of return on its assets which is equivalent to the weighted average cost of capital (WACC) making choice B correct.
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Home » Business » Which one of the following represents the minimum rate of return a firm must earn on its assets if it is to maintain the current value of its securities? A. Pretax cost of debt B. Weighted average cost of capital C. Cost of equity D.
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