Which of the Following May Be True of the Cost

question 25

Multiple Choice

Which of the following may be true of the cost of debt and cost of equity?

• A) The weighted average cost of capital is computed by assigning weights to the cost of debt and the cost of equity of a firm.
• B) The cost of debt for a firm is always equal to the cost of equity to the firm.
• C) The cost of internally generated equity for a firm is greater than the cost of externally generated equity funds for the firm.
• D) The cost of internally generated equity for a firm is less than the cost of debt for the firm.
• E) The cost of externally generated equity is the sum of the cost of debt and the cost of retained earnings.

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Definitions:

Control Measures

Actions, mechanisms or policies implemented to regulate processes and diminish risks.

Sarbanes-Oxley Act

A United States federal law enacted in 2002 to protect investors by improving the accuracy and reliability of corporate disclosures.

Internal Controls

Procedures and policies implemented by a company to safeguard its assets, ensure accurate and reliable financial reporting, and promote compliance with laws and regulations.

Auditors

Professionals who examine and verify a company's financial statements and records for accuracy and compliance with laws and regulations.