Answer:
The correct answer of this is option B
The rates of return, or costs, that a firm must pay to raise funds to invest in capital budgeting projects are determined by the investors who purchase the firm's stocks and bonds.
No one will be willing to purchase the company's bonds, preferred stock, or common stock if it doesn't
earn a minimum rate of return to pay the cost of raising capital to finance investments. This benchmark, or the company's necessary rate of return, is known as the COST OF CAPITAL.
The ideal balance of debt and equity financing that most businesses strive to achieve and maintain is known as the target capital structure.
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