The cost of capital used in capital budgeting should reflect the average cost of the various sources of investor-supplied funds a firm uses to acquire assets. T/F

Answer: True

Explanation: In simple words, cost of capital used in the capital budgeting is the average rate of return that is expected by the investors of the business. A company acquire funds for operations through securities like debt, equity and preference and the cost of capital reflects the cost that a company has to bear for borrowing the money.

Cost of capital is used for evaluating the profitability of various projects that a company is intended to take.