Which of the Following Statements Is Correct

question 22

Multiple Choice

Which of the following statements is correct?

• A)The cost of capital used to evaluate a project should be the cost of the specific type of financing used to fund that project.
• B)The cost of debt used to calculate the weighted average cost of capital is based on an average of the cost of debt already issued by the firm and the cost of new debt.
• C)One problem with the CAPM approach to estimating the cost of equity capital is that if a firm's stockholders are, in fact, not well diversified, beta might be a poor measure of the firm's true investment risk.
• D)The bond-yield-plus-risk-premium approach is the most sophisticated and objective method of estimating a firm's cost of equity capital.
• E)The cost of equity capital is generally easier to measure than the cost of debt, which varies daily with interest rates, or the cost of preferred stock which is issued infrequently.

---

Definitions:

Deadline

A specific date or time by which a task, project, or assignment must be completed.

Corporate Price

The price at which a corporation offers its products or services to customers, often influenced by costs, market demand, and competitive landscape.

Overbooking

The practice, often used in the travel and hospitality industry, of accepting more reservations than there is available capacity, based on predictions of last-minute cancellations.

Asset Value

The monetary worth of physical or non-physical items owned by an individual or entity, which can be converted into cash or provide economic benefits.