But, Mr. Miller, you have said that the opportunity cost of capital is the rate of return

Question:

But, Mr. Miller, you have said that the opportunity is the rate of return on alternative investment projects available to the firm. So long as the firm has debt outstanding, one opportunity for idle funds will be to retire debt. Therefore, the cannot be higher than the current for any firm with debt outstanding. How should Mr. Miller reply?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking...