The Cost of Equity Is More Difficult to Determine Than

question 43

Multiple Choice

The cost of equity is more difficult to determine than the cost of debt because:

• A)cash flows to equity-holders is not contractually set,so when that cash flow will take place is not certain.
• B)the discount rate used to determine cost of equity is not set as it is in determining the cost of debt.
• C)the transaction costs of issuing equity are not as easy to determine as the transaction costs of issuing debt.
• D)the cost of equity is subject to more contingencies than the cost of debt.

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Definitions:

Polyandry

A mating system in which a female has multiple male mates at the same time.

Genetic Diversity

The variety of genetic information present within species, populations, or individuals, crucial for adaptation, survival, and resistance to diseases.

Inbreeding Depression

A reduction in the average fitness of inbred individuals relative to that of outbred individuals. It arises because rare recessive alleles become expressed in a homozygous state where they can affect detrimentally the performance of individuals.

Sperm Competition

A form of sexual selection occurring after mating, in which the sperm from multiple males compete to fertilize the eggs of a female.