The Cost of Capital Is Sometimes Referred to as the Hurdle

question 134

True/False

The cost of capital is sometimes referred to as the hurdle or discount rate.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, which can include payment of interest on bonds, loans, convertible debt, and lines of credit.

Capital Structure

The mix of various forms of external funds and equity that a firm uses to finance its activities.

High Leverage

Refers to the use of significant amounts of borrowed money (debt) to increase the potential return of an investment.

Interest Obligations

The amount of interest that a borrower is contractually obligated to pay to lenders over a specified period of time.