Questions about Costs of Capital. Which of the following is true: 1. Cost of Equity is lower than cost of debt because equityholders face higher risk than debtholders II. The expected cash flows from the projects that have higher uncertainty normally should be discounted at a lower rate. III. Rational investors require to be compensated for bearing higher risks by requiring higher expected return Oll only OI only OI and III only II and III only Ill only
Questions about Costs of Capital. Which of the following is true: 1. Cost of Equity is lower than cost of debt because equityholders face higher risk than debtholders II. The expected cash flows from the projects that have higher uncertainty normally should be discounted at a lower rate. III. Rational investors require to be compensated for bearing higher risks by requiring higher expected return Oll only OI only OI and III only II and III only Ill only
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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Transcribed Image Text:Questions about Costs of Capital. Which of the following is true:
1. Cost of Equity is lower than cost of debt because equityholders face higher risk
than debtholders
II. The expected cash flows from the projects that have higher uncertainty
normally should be discounted at a lower rate.
III. Rational investors require to be compensated for bearing higher risks by requiring
higher expected return
O II only
OI only
OI and III only
II and III only
O III only
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