1421. Firm’s cost of capital is the average cost of ________.
A. All sources *
B. All borrowings
C. Share capital
D. Share Bonds& Debentures
1422. An implicit cost of increasing proportion of debt is _________.
A. Tax should not not be available on new debt
B. P.E. Ratio would increase
C. Equirty shareholders would demand higher return *
D. Rate of return of the company would decrease
1423. Cost of Redeemable preferene share capital is ___________.
A. Rate of divident
B. After tax rate of devident
C. Discount rate that equates PV of inflows and out-flows relating to capital *
D. None of the above
1424. Which of the following is true ?
A. Retained earnings are cost free
B. External equity is cheaper than internal equity
C. Retained earnings are cheaper tha external equity *
D. Retained earnings are costlier than external equity
1425. Cost of capital may be defined as __________.
A. Weighted average cost of all debts
B. Rate of return expected by equity shareholders
C. Average IRR of the projects of the firm
D. Minimum rate of return that the firm should earn *
1426. Minimum rate of return that a firm must earn in order to satisfy its investors, is also known as _______.
A. Average return on investment
B. Weighted average cost of capital *
C. Net profit ratio
D. Average cost of borrowing
1427. Cost capital for equity share capital does not imply that _________.
A. Market price is equal to book value of share
B. Shareholders are ready to subscribe to right issue
C. Market price is more than issue price
D. AC of the three above *
1428. In order to calculate the proportion of equity financing used by the company , the following should be used _________.
A. Authorized share capital
B. Equity share capital plus reserves and surplus *
C. Equity share capital plus preference share capital
D. Equity share capital plus long term debt
1429. The term capital structure denotes_________.
A. Total of liability side of balance sheet
B. Equity funds, preference capital ad long term debt *
C. Total shareholders equity
D. Types of capital issued by a company
1430. Debt financing is a cheaper source of financing because of ____________
A. Time value of money
B. Rate of interest
C. Tax-deductibility of interest *
D. Dividends not payable to lenders