A Firm Has Determined Its Cost of Each Source of Capital

question 10

Multiple Choice

A firm has determined its cost of each source of capital and optimal capital structure,which is composed of the following sources and target market value proportions: The weighted average cost of capital is ________.

• A) 6 percent
• B) 10.7 percent
• C) 11 percent
• D) 15 percent

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Definitions:

Break Even

The point at which total costs and total revenue are equal, resulting in no net loss or gain from business activities.

Authors' Royalties

Authors' royalties are payments made to authors from publishers or producers, based on a percentage of sales of their work.

Fixed Cost

Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, and insurance.

Debt-to-Total-Assets Ratios

A measure that indicates what proportion of a company's assets is financed through debt.