Answer: minimum required rate of return of investors in the company's equity.

## Explanation The cost of equity represents the minimum rate of return that investors require to invest in a company's equity. This is the correct interpretation because: 1. **Definition of Cost of Equity**: The cost of equity is the return a company must offer to its equity investors to compensate them for the risk of investing in the company. 2. **Why not option A**: A company's intrinsic value is determined by discounting future cash flows at the cost of equity, but the cost of equity itself is not a proxy for intrinsic value. Intrinsic value is an output, while cost of equity is an input in valuation models. 3. **Why not option B**: Accounting return on equity (ROE) is a historical measure of profitability calculated as net income divided by shareholders' equity. It reflects past performance, while cost of equity is a forward-looking measure of required return based on risk. 4. **Correct interpretation**: The cost of equity serves as a proxy for the minimum required rate of return because it represents the opportunity cost of capital for equity investors - what they could earn by investing in alternative investments with similar risk. **Key Concept**: Cost of equity = Risk-free rate + Equity risk premium × Beta This formula shows that cost of equity compensates investors for: - Time value of money (risk-free rate) - Market risk (equity risk premium) - Company-specific risk (beta) Therefore, option C is the correct answer as it accurately describes the cost of equity as the minimum required rate of return for equity investors.

Author: LeetQuiz .