In Determining the Cost of Debt, Several Factors Must Be

question 77

Multiple Choice

In determining the cost of debt, several factors must be considered. All of the following are those factors EXCEPT ____.

• A) the firm's before-tax cost of debt
• B) the firm's tax rate
• C) flotation costs
• D) the firm's growth rate of dividends

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Definitions:

Reserve

A portion of funds or resources set aside for specific future use, often related to monetary or commodity resources within financial institutions or government reserves.

Excessive Reserves

Funds held by banks over and above the legal reserve requirement, not required but possibly maintained for additional safety or for other purposes.

Required Reserves

Required Reserves are the portion of depositors' balances that banks must have on hand as cash, according to central bank regulations.

Actual Reserves

The physical quantity of a resource or commodity that is known to be available and extractable under current conditions.