Cost of Capital and Financial Policy
1. Which of the following is the minimum return a company needs to earn to satisfy all its investors?
A. NPV C. BASF 2015
B. RE D. WACC
2. The equation RP = D/P0 is used to determine the
A. cost of a bond.
B. cost of preferred stock.
C. cost of common stock.
D. dividend resulting from one share of stock.
3. The cost of equity can be viewed as the combination of
A. the financial leverage and the cost of capital.
B. corporate taxes and shareholder claims.
C. business risk and financial risk.
D. the weighted average cost of capital and the capital structure.
4. The return that lenders require on a firm’s new borrowing is known as the
A. financial leverage. C. warrant.