Which One of the Following Is the Primary Determinant of a Firm's

question 55

Multiple Choice

Which one of the following is the primary determinant of a firm's cost of capital?

• A) Debt-equity ratio of any new funds raised
• B) Marginal tax rate
• C) Pretax cost of equity
• D) Aftertax cost of equity
• E) Use of the funds raised

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Definitions:

Net Income

The total profit of a company after subtracting all expenses, taxes, and costs from total revenue.

Statement Of Cash Flows

A financial statement that highlights the major activities that impact cash flows and, hence, affect the overall cash balance.

Operating Activities

These involve the primary day-to-day activities of a business, such as sales and the purchase of goods or services, which are reflected in its cash flow.

Comparative Balance Sheet

A financial statement that presents the financial position of a company at two or more different points in time, allowing for analysis of trends in assets, liabilities, and equity.