The Weighted Average of the Cost of Obtaining Funds in the Form

question 59

Multiple Choice

The weighted average of the cost of obtaining funds in the form of debt and/or equity is known as the:

• A) cost of debt.
• B) cost of capital.
• C) cost of borrowing.
• D) cost of investment.

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Definitions:

Common Stock

Common stock represents shares of ownership in a corporation, giving holders voting rights and a residual claim on corporate earnings in the form of dividends.

After-Tax Interest Expense

The cost of borrowing after adjusting for the effects of taxes, calculated by subtracting the tax savings from the total interest expense.

Basic Earnings Per Share

A measure of a company's profitability that divides net income by the number of outstanding common shares.

Noncontrolling Interest

The share of equity in a subsidiary not held by the parent company, reflecting the interest that is not controlled by the majority shareholder.