The Cost of a Particular Source of Capital (Debt,preferred Stock,common

question 131

True/False

The cost of a particular source of capital (debt,preferred stock,common stock)is equal to the investor's required rate of return after adjusting for the effects of both flotation costs and corporate taxes.

---

Definitions:

Voucher Payment

A method of paying bills where a record is kept of all invoices and payments.

Discount Lost

The additional expense a company incurs when it fails to take advantage of the payment terms offered by suppliers, like missing early payment discounts.

Gross Method

Accounting treatment for purchase discounts where discounts are not considered until actually taken.

Note Payable

A promissory note from the maker’s point of view.