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WorksheetsCOST OF CAPITAL
Total questions: 9
Worksheet time: 17mins
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 corporation has concluded that its financial risk premium is too high. In order to decrease this, the firm can
increase the proportion of long term debt to decrease the cost of capital
increase the proportion of short term debt to decrease the cost of capital
decrease the proportion of common stock equity to decrease financial risk
increase the proportion of common stock equity to decrease financial risk
Choose the right statement from the following:
Cost of debt is always higher than cost of equity
Cost of debt is always lower than cost of equity
Cost of debt can be higher or lower than cost of equity
When company doesn't pay dividend, the cost of equity is zero
A firm has common stock with a market price of $25 per share and an expected dividend of $2 per share at the end of the coming year. The growth rate in dividends has been 5%. The cost of the firm's commonstock equity is
5%
8%
10%
13%
The Capital Structure of a company means
the proportion between LT debt and equity
the proportion between liability and equity
the proportion between liability and total asset
the proportion between ST debt + LT debt and equity
Cost of capital can be divided into three item except;
Cost of debt
Cost of preferred share
Cost of investment
Cost of common share
Y Ltd. issues 14% prefernce shares of face value of Rs.100 each whch realizes Rs.92 per share for the company. The shares are repayable after 12 years at par. Calcualate the cost of preference shares.
(a)
The market price of equity shares of NG Ltd. is Rs.140. If annual dividend expected by the investors is Rs.30 per share, determine the cost of capital.
(a)
The market price of equity shares of a comapny is Rs.150. The comapny had paid a dividend of Rs.30 last year. The investors expect a growth of 5% in dividend every year. Clacualte the cost of equity capital.
(a)
