1. Which of the following is not a component used in calculating the cost of capital? A. The cost of short-term debt. B. The cost of common stock. C. The cost of long-term debt. D. The cost of retained earnings. 2. Which of the following statements about cost of capital is false? A. The overall cost of capital is the minimum rate a firm must earn on all investments to cover capital costs. B. The overall cost of capital is the cost of the firm's equity capital at which the market value of the firm will remain unchanged. C. Cost of capital is based on what the company pays for its capital, not the return earned on the capital employed. D. The overall cost of capital is the weighted average cost of the various debt and equity components in a firm's capital structure.
1. Which of the following is not a component used in calculating the cost of capital? A. The cost of short-term debt. B. The cost of common stock. C. The cost of long-term debt. D. The cost of retained earnings. 2. Which of the following statements about cost of capital is false? A. The overall cost of capital is the minimum rate a firm must earn on all investments to cover capital costs. B. The overall cost of capital is the cost of the firm's equity capital at which the market value of the firm will remain unchanged. C. Cost of capital is based on what the company pays for its capital, not the return earned on the capital employed. D. The overall cost of capital is the weighted average cost of the various debt and equity components in a firm's capital structure.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1. Which of the following is not a component used in calculating the cost of capital?
A. The cost of short-term debt.
B. The cost of common stock.
C. The cost of long-term debt.
D. The cost of retained earnings .
2. Which of the following statements about cost of capital is false?
A. The overall cost of capital is the minimum rate a firm must earn on all investments to cover capital costs.
B. The overall cost of capital is the cost of the firm's equity capital at which the market value of the firm will remain unchanged.
C. Cost of capital is based on what the company pays for its capital, not the return earned on the capital employed.
D. The overall cost of capital is the weighted average cost of the various debt and equity components in a firm's capital structure.
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