COC AND DIVIDEND THEORY

The cost of equity share or debt is known as __________

• The specific cost of capital

• The related cost of capital

• The burden on the shareholder

• None of the above

Which of the following methods involves computing the cost of capital by dividing the dividend by market price/net proceeds per share?

• Adjusted price method

• Price earning method

• Dividend yield method

• Adjusted dividend method

Which among the following figures is not relevant while calculating the cost of the redeemable preference shares?

• Earnings per share

• Flotation cost

• Discount

• None of the above

Which of the following factors affecting the cost of capital can be controlled by the firm?

• Tax rates

• Dividend policy

• Level of interest rates

• All of the above

Which of the following is an uncontrollable factor that affects the cost of capital for a firm?

• Capital structure policy

• Debt service charges

• Investment policy

• None of the above

Which of the following factors affects the determination of the cost of capital for a firm?

• Operating and financing decisions

• General economic factors

• Market conditions

• All of the above

The cost of capital for a firm _______

• Is the return required on the total assets of a firm

• Refers to the internal rate of return

• Varies inversely with the overall cost of debt

• None of the above

The cost of equity share capital is greater than the cost of debt because __________.

• The face value of equity shares is lower than the face values of debentures in most cases

• Equity shares are not easily saleable

• Equity shares do not provide a fixed dividend rate

• Equity shares carry a higher risk than debts

The cost of preference share capital is calculated by _________.

• Dividing the book value per preference share by the fixed dividend per share

• Dividing the price per preference share by the fixed dividend per share

• Dividing the price per preference share by the fixed dividend per share and then adding the growth rate

• Dividing the price per preference share by the fixed dividend per share and then adding the risk premium

____ is the rate of return associated with the best investment opportunity for the firm and its shareholders that will be forgone if the projects presently under consideration by the firm were accepted.

• Explicit Cost

• Implicit Cost

• Future Cost

• Specific Cost