Costs of LONG TERM SOURCE of Financing (LO2)

What is the primary cost associated with share capital for a company?

• A) Interest payments

• B) Dividends

• C) Loan origination fees

• none of the above

Which of the following represents the cost of retained profits for a company?

• Opportunity cost of not distributing dividends

• Interest expense

• Loan servicing fees

The cost of debt financing primarily includes:

• Dividend payments to shareholders

• Loan origination fees

• Capital appreciation

What is the main cost associated with bank loans for a business?

• Equity dilution

• Dividend payments

• Interest payments

What is the primary cost consideration for businesses when obtaining venture capital?

• Giving up ownership and control

• Dividend payments

Which of the following does not represent a cost of debt financing?

• Equity dilution

• Interest payments

Which long-term source of finance involves selling ownership stake in the company?

• Venture capital

• Bank loans

• Overdraft