A firm's cost of financing is equal to its: WACC, required yield that investors seek for various kinds of securities, required rate of return that investors seek for various kinds of securities, or all of these answers.
I am tempted to pick all of these, but can not find all info I need to support my answer.
The firm's cost of financing can be defined as the cost that the firm incurs in order to obtain funds for its operations, growth, or investment projects. It represents the return that investors expect to receive in order to provide capital to the firm.
To calculate the firm's cost of financing, there are different factors to consider, such as the weighted average cost of capital (WACC) and the required yield or rate of return that investors seek for various kinds of securities.
The WACC represents the average cost of financing for the firm, taking into account the proportion of each source of financing (such as equity and debt) and their respective costs. It considers the required rate of return for both equity investors (stockholders) and debt investors (lenders). Therefore, the WACC incorporates the required yield or rate of return that investors seek for various kinds of securities.
In this sense, if you choose the answer "all of these," you are correct. The firm's cost of financing includes the WACC, which encompasses the required yield or rate of return sought by investors for different types of securities. Both equity investors and debt investors seek a return on their investments, and these expected returns contribute to the overall cost of financing for the firm.