What Is the Cost of Shares to the Business Is

question 2

Multiple Choice

What is the cost of shares to the business is equivalent to?

• A) The average year-over-year percent increase in share price.
• B) The NPV of the return to the company from its investments.
• C) The bank rate grossed up by a risk premium and the rate of inflation.
• D) The IRR used to evaluate the company's investment projects.
• E) The NPV of the future share prices.

---

Definitions:

Effective-Interest Method

An accounting technique used to amortize the discount or premium on bonds payable or receivable over the life of the bond, reflecting the bond's yield.

Zero Coupon Bonds

Bonds issued at a discount from their face value, which do not pay periodic interest but are redeemed at full face value at maturity.

Effective Interest Rate

The real rate of interest taking into account the effects of compounding over a given period.