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

question 35

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 preference share.
• 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.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.