Question

1. The cost of equity for a corporation is: A) the rate of return required by...

1. The cost of equity for a corporation is:

A) the rate of return required by a firm’s stockholders

B) dividends a firm pays

C) the price of borrowing money

D) all of the above

2. The cost of debt for a corporation is:

A) the price of borrowing money.

B) the rate of return required by a firm’s stockholders.

C) the rate of return to all investors in the firm.

D) all of the above.

3. The most appropriate discount rate for a project is typically:

Group of answer choices

A) the risk-free rate of return

B) the market interest rate

C) the actual return of the project

D) the firm’s average cost of capital

4. The cost of debt for a corporation is:

A) the price of borrowing money.

B) the rate of return required by a firm’s stockholders.

C) the rate of return to all investors in the firm.

D) all of the above.

Homework Answers

Answer #1

1]

A - The rate of return required by a firm’s stockholders.

The cost of equity is the opportunity cost of equity capital, which is the minimum return required by stockholders for investing in the company

2]

A) the price of borrowing money.

Cost of debt is the interest rate paid on debt (loans or bonds)

3]

D) the firm’s average cost of capital

The appropriate discount rate is the weighted average cost of capital, considering all the sources of capital used in the capital structure

4]

A) the price of borrowing money.

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