Capital: Capital refers to financial assets or the financial values of assets, like funds held in deposit accounts and tangible machinery and production equipment used in factories and firms. It can also be referred as the money, credit, and other types of funding that create wealth. Cost of capital: Cost of capital can be defined as the opportunity cost used to make a specific investment. It refers to the rate of return that may be earned by investing the same amount in a different investment involving equal amount of risk. Thus, it is the rate of return needed to convince an investor to make an investment. To ascertain: The reason why a firm’s capital has a cost.

Question

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Answer 1

Question

Chapter 13, Problem 1CC

Summary Introduction

Capital:

Capital refers to financial assets or the financial values of assets, like funds held in deposit accounts and tangible machinery and production equipment used in factories and firms. It can also be referred as the money, credit, and other types of funding that create wealth.

Cost of capital:

Cost of capital can be defined as the opportunity cost used to make a specific investment. It refers to the rate of return that may be earned by investing the same amount in a different investment involving equal amount of risk. Thus, it is the rate of return needed to convince an investor to make an investment.

To ascertain: The reason why a firm’s capital has a cost.

Expert Solution & Answer

Explanation of Solution

Cost of capital is the cost paid to the investors for making an investment in a firm. It may be in the form of Dividend cost or Interest cost. In certain firms, there will be also some non-monetary costs such as Bonus shares and Right shares.

A firm may raise money from both equity and debt. Both the equity holders and debt holders in a firm have a definite rate if return, since they forego the opportunity to invest the money in some other investment. The activity of providing this is the cost, which a firm bears in order to obtain capital from investors. Such cost is measured by the Cost of capital or the Weighted Average Cost of Capital.

Conclusion

Hence, a firm’s capital has a cost in order to pay to the investors for making an investment in the firm.

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Students have asked these similar questions

Suppose that you are a U.S.-based importer of goods from the United Kingdom. You expect the value of the pound to increase against the U.S. dollar over the next 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The U.S. risk-free rate is 5.5 percent, and the U.K. risk-free rate is 4.5 percent. These rates are expected to remain unchanged over the next month. The current spot rate is $1.90. 1.Move forward 10 days. The spot rate is $1.93. Interest rates are unchanged. Calculate the value of your forward position. Do not round intermediate calculations. Round your answer to 4 decimal places.

Don't solve. I mistakenly submitted blurr image please comment i will write values. please dont Solve with incorrect values otherwise unhelpful.

The image is blurr please comment i will write values. please dont Solve with incorrect values otherwise unhelpful.

Answer 2

Question

Chapter 13, Problem 1CC

Summary Introduction

Capital:

Capital refers to financial assets or the financial values of assets, like funds held in deposit accounts and tangible machinery and production equipment used in factories and firms. It can also be referred as the money, credit, and other types of funding that create wealth.

Cost of capital:

Cost of capital can be defined as the opportunity cost used to make a specific investment. It refers to the rate of return that may be earned by investing the same amount in a different investment involving equal amount of risk. Thus, it is the rate of return needed to convince an investor to make an investment.

To ascertain: The reason why a firm’s capital has a cost.

Expert Solution & Answer

Explanation of Solution

Cost of capital is the cost paid to the investors for making an investment in a firm. It may be in the form of Dividend cost or Interest cost. In certain firms, there will be also some non-monetary costs such as Bonus shares and Right shares.

A firm may raise money from both equity and debt. Both the equity holders and debt holders in a firm have a definite rate if return, since they forego the opportunity to invest the money in some other investment. The activity of providing this is the cost, which a firm bears in order to obtain capital from investors. Such cost is measured by the Cost of capital or the Weighted Average Cost of Capital.

Conclusion

Hence, a firm’s capital has a cost in order to pay to the investors for making an investment in the firm.

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Answer 3

Question

Chapter 13, Problem 1CC

Summary Introduction

Capital:

Capital refers to financial assets or the financial values of assets, like funds held in deposit accounts and tangible machinery and production equipment used in factories and firms. It can also be referred as the money, credit, and other types of funding that create wealth.

Cost of capital:

Cost of capital can be defined as the opportunity cost used to make a specific investment. It refers to the rate of return that may be earned by investing the same amount in a different investment involving equal amount of risk. Thus, it is the rate of return needed to convince an investor to make an investment.

To ascertain: The reason why a firm’s capital has a cost.

Expert Solution & Answer

Explanation of Solution

Cost of capital is the cost paid to the investors for making an investment in a firm. It may be in the form of Dividend cost or Interest cost. In certain firms, there will be also some non-monetary costs such as Bonus shares and Right shares.

A firm may raise money from both equity and debt. Both the equity holders and debt holders in a firm have a definite rate if return, since they forego the opportunity to invest the money in some other investment. The activity of providing this is the cost, which a firm bears in order to obtain capital from investors. Such cost is measured by the Cost of capital or the Weighted Average Cost of Capital.

Conclusion

Hence, a firm’s capital has a cost in order to pay to the investors for making an investment in the firm.

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Answer 4

Question

Chapter 13, Problem 1CC

Summary Introduction

Capital:

Capital refers to financial assets or the financial values of assets, like funds held in deposit accounts and tangible machinery and production equipment used in factories and firms. It can also be referred as the money, credit, and other types of funding that create wealth.

Cost of capital:

Cost of capital can be defined as the opportunity cost used to make a specific investment. It refers to the rate of return that may be earned by investing the same amount in a different investment involving equal amount of risk. Thus, it is the rate of return needed to convince an investor to make an investment.

To ascertain: The reason why a firm’s capital has a cost.

Expert Solution & Answer

Explanation of Solution

Cost of capital is the cost paid to the investors for making an investment in a firm. It may be in the form of Dividend cost or Interest cost. In certain firms, there will be also some non-monetary costs such as Bonus shares and Right shares.

A firm may raise money from both equity and debt. Both the equity holders and debt holders in a firm have a definite rate if return, since they forego the opportunity to invest the money in some other investment. The activity of providing this is the cost, which a firm bears in order to obtain capital from investors. Such cost is measured by the Cost of capital or the Weighted Average Cost of Capital.

Conclusion

Hence, a firm’s capital has a cost in order to pay to the investors for making an investment in the firm.

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Answer 5

Chapter 13, Problem 1CC

Summary Introduction

Capital:

Capital refers to financial assets or the financial values of assets, like funds held in deposit accounts and tangible machinery and production equipment used in factories and firms. It can also be referred as the money, credit, and other types of funding that create wealth.

Cost of capital:

Cost of capital can be defined as the opportunity cost used to make a specific investment. It refers to the rate of return that may be earned by investing the same amount in a different investment involving equal amount of risk. Thus, it is the rate of return needed to convince an investor to make an investment.

To ascertain: The reason why a firm’s capital has a cost.

Expert Solution & Answer

Explanation of Solution

Cost of capital is the cost paid to the investors for making an investment in a firm. It may be in the form of Dividend cost or Interest cost. In certain firms, there will be also some non-monetary costs such as Bonus shares and Right shares.

A firm may raise money from both equity and debt. Both the equity holders and debt holders in a firm have a definite rate if return, since they forego the opportunity to invest the money in some other investment. The activity of providing this is the cost, which a firm bears in order to obtain capital from investors. Such cost is measured by the Cost of capital or the Weighted Average Cost of Capital.

Conclusion

Hence, a firm’s capital has a cost in order to pay to the investors for making an investment in the firm.

Answer 6

Chapter 13, Problem 1CC

Summary Introduction

Capital:

Capital refers to financial assets or the financial values of assets, like funds held in deposit accounts and tangible machinery and production equipment used in factories and firms. It can also be referred as the money, credit, and other types of funding that create wealth.

Cost of capital:

Cost of capital can be defined as the opportunity cost used to make a specific investment. It refers to the rate of return that may be earned by investing the same amount in a different investment involving equal amount of risk. Thus, it is the rate of return needed to convince an investor to make an investment.

To ascertain: The reason why a firm’s capital has a cost.

Expert Solution & Answer

Explanation of Solution

Cost of capital is the cost paid to the investors for making an investment in a firm. It may be in the form of Dividend cost or Interest cost. In certain firms, there will be also some non-monetary costs such as Bonus shares and Right shares.

A firm may raise money from both equity and debt. Both the equity holders and debt holders in a firm have a definite rate if return, since they forego the opportunity to invest the money in some other investment. The activity of providing this is the cost, which a firm bears in order to obtain capital from investors. Such cost is measured by the Cost of capital or the Weighted Average Cost of Capital.

Conclusion

Hence, a firm’s capital has a cost in order to pay to the investors for making an investment in the firm.

Answer 7

Chapter 13, Problem 1CC

Summary Introduction

Capital:

Capital refers to financial assets or the financial values of assets, like funds held in deposit accounts and tangible machinery and production equipment used in factories and firms. It can also be referred as the money, credit, and other types of funding that create wealth.

Cost of capital:

Cost of capital can be defined as the opportunity cost used to make a specific investment. It refers to the rate of return that may be earned by investing the same amount in a different investment involving equal amount of risk. Thus, it is the rate of return needed to convince an investor to make an investment.

To ascertain: The reason why a firm’s capital has a cost.

Answer 8

Expert Solution & Answer

Explanation of Solution

Cost of capital is the cost paid to the investors for making an investment in a firm. It may be in the form of Dividend cost or Interest cost. In certain firms, there will be also some non-monetary costs such as Bonus shares and Right shares.

A firm may raise money from both equity and debt. Both the equity holders and debt holders in a firm have a definite rate if return, since they forego the opportunity to invest the money in some other investment. The activity of providing this is the cost, which a firm bears in order to obtain capital from investors. Such cost is measured by the Cost of capital or the Weighted Average Cost of Capital.