Due to Changes in Regulatory Requirements,the Transactions Costs Associated with Selling

question 69

Multiple Choice

Due to changes in regulatory requirements,the transactions costs associated with selling corporate securities increased by $1 per share.This change will

• A) cause the cost of capital to decrease.
• B) cause the cost of capital to increase.
• C) have no effect on the cost of capital because transactions costs are expensed immediately.
• D) cause the cost of capital to decrease only if investors may be billed for part of the increase in transactions costs.

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Definitions:

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life to account for wear and tear.

Residual Value

The projected valuation of an asset at the termination of its usability period.

Depreciation Estimates

Projections made regarding the decrease in value of a fixed asset over time, affecting financial statements and tax liabilities.

Residual Value

The anticipated worth of an asset upon reaching the conclusion of its serviceable life.