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Business, 25.08.2021 03:10 kylemartinez13

Companies issue bonds, preferred stock, and common equity to raise capital to invest in capital budgeting projects. Capital is a necessary factor of production, and like any other factor, it has a cost. This cost is equal to the represent the costs of those securities to the firm. Companies estimate the required returns on their securities, calculate a weighted average of the costs of their different types of capital, and use this average cost for capital budgeting purposes.

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Companies issue bonds, preferred stock, and common equity to raise capital to invest in capital budg...
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