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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