Which of the Following Statements Regarding Calculating a Firm's Cost

question 107

Multiple Choice

Which of the following statements regarding calculating a firm's cost of capital is correct?

• A) The after-tax cost of debt is generally more expensive than the after-tax cost of preferred stock.
• B) Since retained earnings are readily available, the cost of retained earnings is generally lower than the cost of debt.
• C) If a company's beta increases, this will increase the cost of capital.
• D) The level of general economic conditions will determine whether a firm should utilize an arithmetic average cost of capital or a weighted average cost of capital.

Apply the concept of the time value of money to capital investment analysis.

Calculate the cash payback period for capital investment projects.

Determine the net present value and present value index of investment projects.

Compute the internal rate of return for investment proposals.

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