1. Opportunity cost of capital (S2.1) Which of the following statements are true? The opportunity cost of capital: a. Equals the interest rate at which the company can borrow. b. Depends on the risk of the cash flows to be valued. c. Depends on the rates of return that shareholders can expect to earn by investing on their own. d. Equals zero if the firm has excess cash in its bank account and the bank account pays no interest.
1. Opportunity cost of capital (S2.1) Which of the following statements are true? The opportunity cost of capital: a. Equals the interest rate at which the company can borrow. b. Depends on the risk of the cash flows to be valued. c. Depends on the rates of return that shareholders can expect to earn by investing on their own. d. Equals zero if the firm has excess cash in its bank account and the bank account pays no interest.
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter13: Valuation: Earnings-based Approach
Section: Chapter Questions
Problem 8QE
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![1. Opportunity cost of capital (S2.1) Which of the following statements are true? The opportunity cost of capital:
a. Equals the interest rate at which the company can borrow.
b. Depends on the risk of the cash flows to be valued.
c. Depends on the rates of return that shareholders can expect to earn by investing on their own.
d. Equals zero if the firm has excess cash in its bank account and the bank account pays no interest.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb4843067-77f2-4785-8c2b-1f36c75d37de%2F5d7d693c-f606-4bad-b05a-a92171e5e4e7%2F1gq7amu_processed.png&w=3840&q=75)
Transcribed Image Text:1. Opportunity cost of capital (S2.1) Which of the following statements are true? The opportunity cost of capital:
a. Equals the interest rate at which the company can borrow.
b. Depends on the risk of the cash flows to be valued.
c. Depends on the rates of return that shareholders can expect to earn by investing on their own.
d. Equals zero if the firm has excess cash in its bank account and the bank account pays no interest.
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