With Respect to Issues Related to the Cost of Capital

question 113

Multiple Choice

With respect to issues related to the cost of capital:

• A)an increase in the debt ratio will result in greater risk for debt holders but not equity holders.
• B)the cost of capital is the return a firm must earn before tax to satisfy security holders.
• C)the WACC is the correct discount rate for average-risk projects.
• D)the expected return on equity is relevant to capital budgeting decisions.

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Definitions:

High Concern

A state of being extremely attentive or anxious about something, especially issues of great importance or significant impact.

Democratic Leader

A leadership style characterized by the involvement of team members in decision-making processes, promoting equality, and encouraging participation and consensus.

Sharing Information

Sharing information involves the distribution or exchange of data, knowledge, or insights between individuals or groups to enhance understanding, efficiency, or collaboration.

Retaining Authority

Keeping decision-making power and control within a certain level of the organization or with specific individuals.