Which of the Following Statements About a Not-For-Profit Firm's Cost

question 9

Multiple Choice

Which of the following statements about a not-for-profit firm's cost of capital estimate is most correct?

• A) The capital structure weights for a not-for-profit firm are set at 50/50, because such firms can raise $1 of debt financing for each dollar of retained earnings.
• B) The cost of tax-exempt debt issued by not-for-profit firms is increased ("grossed up") by 1 − T in the WACC estimate to reflect the fact that such firms do not pay taxes.
• C) Equity (fund) capital has a cost that is roughly equivalent to the cost of retained earnings to similar investor-owned companies.
• D) Not-for-profit firms have a zero cost of capital.
• E) Since a not-for-profit firm has no shareholders, its WACC estimate does not include a cost of equity (fund capital) estimate.

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Definitions:

Middle-Aged Adults

Middle-Aged Adults typically refers to individuals who are in the age range of approximately 45 to 65 years, often experiencing shifts in physical health, cognitive function, and social roles.

Older Adults

Individuals generally aged 65 years and older, often discussed in contexts related to health, social needs, and policy planning.

Somatic Symptom

A physical symptom that is caused or exacerbated by mental factors, often part of a somatic symptom disorder.

Substance Abuse

Engaging in the harmful intake of substances that alter the psyche, encompassing both alcohol and banned drugs.