cost of capital

MCQsQuestion.com has 18 Question/Answers about Topic cost of capital

In weighted average cost of capital, a company can affect its capital cost through

In weighted average cost of capital, a company can affect its capital cost through
  • A. policy of capital structure
  • B. policy of dividends
  • C. policy of investment
  • D. all of above
  • Correct Answer: Option D

In pure play method, a company can calculate its own cost of capital with help of averaging an

In pure play method, a company can calculate its own cost of capital with help of averaging an
  • A. other company capital policy
  • B. other company beta
  • C. other company cost
  • D. other division cost
  • Correct Answer: Option B

Rate of required return by debt holders is used for estimation the

Rate of required return by debt holders is used for estimation the
  • A. cost of debt
  • B. cost of equity
  • C. cost of internal capital
  • D. cost of reserve assets
  • Correct Answer: Option A

If future return on common stock is 14% and rate on T-bonds is 5% then current market risk premium will be

If future return on common stock is 14% and rate on T-bonds is 5% then current market risk premium will be
  • A. 19%
  • B. 9%
  • C. $9
  • D. $19
  • Correct Answer: Option B

An attempt to make correction by adjusting historical beta to make it closer to an average beta is classified as

An attempt to make correction by adjusting historical beta to make it closer to an average beta is classified as
  • A. adjusted stock
  • B. adjusted beta
  • C. adjusted coefficient
  • D. adjusted risk
  • Correct Answer: Option B

Dividend per share is $18 and sell it for $122 and floatation cost is $4 then component cost of preferred stock will be

Dividend per share is $18 and sell it for $122 and floatation cost is $4 then component cost of preferred stock will be
  • A. 15.25%
  • B. 0.1525 times
  • C. $15.25
  • D. 0.15%
  • Correct Answer: Option A

Stock selling price is $35, expected dividend is $5 and expected growth rate is 8% then cost of common stock would be

Stock selling price is $35, expected dividend is $5 and expected growth rate is 8% then cost of common stock would be
  • A. $40
  • B. 22.29%
  • C. 0.1428
  • D. $80
  • Correct Answer: Option B

In weighted average cost of capital, rising in interest rate leads to

In weighted average cost of capital, rising in interest rate leads to
  • A. increase in cost of debt
  • B. increase capital structure
  • C. decrease in cost of debt
  • D. decrease capital structure
  • Correct Answer: Option A

Premium which is considered as difference of expected return on common stock and current yield on Treasury bonds is called

Premium which is considered as difference of expected return on common stock and current yield on Treasury bonds is called
  • A. current risk premium
  • B. past risk premium
  • C. beta premium
  • D. expected premium
  • Correct Answer: Option A

Special situation in which large projects are financed by with and securities claims on project’s cash flow is classified as

Special situation in which large projects are financed by with and securities claims on project’s cash flow is classified as
  • A. claimed securities
  • B. project financing
  • C. stock financing
  • D. interest cost
  • Correct Answer: Option B

In retention growth model, payout ratio is subtracted from one to calculate

In retention growth model, payout ratio is subtracted from one to calculate
  • A. present value ratio
  • B. future value ratio
  • C. retention ratio
  • D. growth ratio
  • Correct Answer: Option C

Risk free rate is subtracted from expected market return is considered as

Risk free rate is subtracted from expected market return is considered as
  • A. country risk
  • B. diversifiable risk
  • C. equity risk premium
  • D. market risk premium
  • Correct Answer: Option C

Variability for expected returns for projects is classified as

Variability for expected returns for projects is classified as
  • A. expected risk
  • B. stand-alone risk
  • C. variable risk
  • D. returning risk
  • Correct Answer: Option B

Retention ratio is 0.60 and return on equity is 15.5% then growth retention model would be

Retention ratio is 0.60 and return on equity is 15.5% then growth retention model would be
  • A. 14.90%
  • B. 25.84%
  • C. 16.10%
  • D. 9.30%
  • Correct Answer: Option D

Stock selling price is $45, an expected dividend is $10 and an expected growth rate is 8% then cost of common stock would be

Stock selling price is $45, an expected dividend is $10 and an expected growth rate is 8% then cost of common stock would be
  • A. $55
  • B. $58
  • C. $53
  • D. 30.22%
  • Correct Answer: Option D
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