Cost of Capital

A firm should use .............. when evaluating an investment

• the least costly source of financing

• the most costly source of financing

• the weighted average cost of all financing sources

• the current opportunity cost

A company Weigthed average cost of capital includes:

• The company capital structure

• The company capital structure & cost of capital

• The company cost of capital

• The company financing sources

The company cost of debt under market value approach can be calculated using:

• The balance or record by financial expenses and total debt

• The CAPM model

• The YTM (Yield to Maturity) rate of each bond issued by the company, and the bond value

• The coupon rate of each bond issued by the company, and the bond value

A greater tax rate will affect company cost of debt (Kd) in the sense that:

• The effective cost of debt will be higher

• The effective cost of debt will be lower

What does reflect for a company their cost of capital?

(a)  

When a company decides financing the major of their operating with debt rather than equity, the company is

• High levered

• Low levered

• Mid-levered

• Non-levered

A company will prefer:

• Really, the WACC rate for a company isn't relevant

• A low WACC rate

• A high WACC rate

Commonly if a company is classified as a SME (Small and Medium Enterprise), the company must consider:

• A lower return to the equity-holders in comparison with a return that would be expected over a large company.

• The same return to the equity holders that would be expected over a large company.

• The company cost of debt (Kd) because it influence the company cost of equity (Ke)

• A higher return to the equity-holders in comparison with a return that would be expected over a large company.

The country risk premium (CRP) is measured mainly considering:

• The continent where the country is located.

• The country's 'debt quality'

• The country president effectiveness

• The flows of foreign capital

When the result of company D/E ratio (Debt to equity ratio) is greater than 1, it indicates:

• A low risk level of company capital structure

• A high risk level of company capital structure

• A low risk level of company cost of capital

• A high risk level of company cost of capital