The weighted average cost of capital is A) the average of the cost of each financing component, weighted by the proportion of each component B) the cost of capital for the firm as a whole C) made up of three financing components: the cost of debt, the cost of preferred stock, and the cost of equity D) All of the above

The weighted average cost of capital is A) the average of the cost of each financing component, weighted by the proportion of each component B) the cost of capital for the firm as a whole C) made up of three financing components: the cost of debt, the cost of preferred stock, and the cost of equity D) All of the above

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 1Q: Define each of the following terms: Weighted average cost of capital, WACC; after-tax cost of debt,...

See similar textbooks

Similar questions

Define each of the following terms: Weighted average cost of capital, WACC; after-tax cost of debt, rd(1 – T); after-tax cost of short-term debt, rstd(1 – T) Cost of preferred stock, rps; cost of common equity (or cost of common stock), rs Target capital structure Flotation cost, F; cost of new external common equity, re
The cost of equity is _______. A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnover
42. For the ratio Return on Capital Employed, which of the following best describes capital employed? A. Share capital B. Share capital + reserves C. Share capital + reserves + long-term capital D. Share capital + reserves + long-term capital + current liabilities
Which of the following is generally excluded in estimating the weighted average cost of capital? c. Preferred Share d. Ordinary Equity a. Short-term debt b. Long-term debt
Which of the following should be used when calculating the weights for a company's capital structure? OA. Historic accounting values OB.Book values OC. Current market values OD. Par and face values
Debt in the capital structure could be treated as if it were common stock in the weighted average cost of capital if debt was: a. participating b. callable c. convertible d. cumulative
which one is correct please confirm QUESTION 2 The most appropriate weights to use in calculating a firm's cost of capital are the proportions of the components in the firm's ____ capital structure. a. historical average b. industry average c. current d. long-range target
Capital structure refers to Select one: a. Total assets minus Liabilities b. Shareholders' equity c. Long-term debt, preferred stock, and common stock equity d. Current assets and Current liabilities
Which ratio indicates the proportion of assets financed out of shareholders’ funds? (A) Debt equity ratio. (B) Fixed assets turnover ratio. (C) Proprietary ratio. (D) Total assets to debt ratio.
The term capital structure refers to_______ O a. Long-term debt, preferred stock, and common stock equity O b. Current assets and current liabilities O c. Shareholders' equity O d. Total assets minus liabilities
The weights used in calculating the weighted average cost of capital should be based on ________. a book values b estimated future values c market values
Calculate the following ratios based on the balance sheet, income statement and cash flow prepared in question ROE Return on Capital Employed (post-tax) Net Profit Margin EBITDA Margin Effective Tax Rate Operating Cost Ratio Gross Profit Margin Total Asset Turnover Ratio Fixed Asset Turnover Ratio Receivables Turnover Ratio Leverage Ratio [Avg. Total Assets / Avg. Total Equity] FCF / EBITDA Interest Coverage Ratio Debt Service Coverage Ratio Basic EPS (Assume Face Value of each share is INR 10) Debt : Equity Ratio Income Statement (INR Cr) Units Mar/14 Saleable Units 4,570 Revenues Gross Revenues INR Cr 2,116 Less: Environment Cess INR Cr 5 Net Revenues INR Cr 2,121 Growth (%) -1.9% Expenses O&M Expenses (% of Project Costs) INR Cr 146 YoY Escalation 5.72% EBITDA INR Cr 1,974 Margin (%) 93.1% Book Depreciation INR Cr 439 Interest Expenses INR…