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Unformatted text preview: and the Cost of Retained Earnings. The use of the weighted average cost of capital is recommended over the cost of the source of funds to be used for the project because the interrelatedness of financing decisions assuming the presence of a target capital structure is reflected in the weighted average cost of capital. The longer the time to maturity, the higher the required rate of return; therefore when an organization needs to raise long term capital, the WACC would probably increase since the WACC is also defined as the cost of borrowing additional funds....
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- Winter '10