How Would a Company's Cost of Capital Calculated from Book

question 106

Multiple Choice

How would a company's cost of capital calculated from book values be affected if the company's bonds were selling for more than face value?

• A) The cost of capital would increase.
• B) The cost of capital would decrease.
• C) The cost of capital would not be affected.
• D) The effect depends on the bonds' coupon rate.

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Definitions:

Principle Of Autonomy

In ethics, the doctrine that stresses the importance of respect for people’s right to self-determination when making decisions.

Principle Of Fidelity

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Not Criminally Responsible

A legal defense asserting that at the time of committing a crime, the person was suffering from a mental disorder that rendered them incapable of understanding the nature and quality of the act.

Fit To Stand Trial

A legal determination that an individual is mentally capable of understanding the charges against them and participating in their defense.