Cost of Capital MCQ – Multiple Choice Questions
12- A ___ is the additional cost incurred to obtain additional funds required by a firm.
(A) average cost
(B) marginal cost
(C) book cost
(D) future cost
13- ___ is also known as component cost of capital.
(A) Future cost
(B) Specific cost
(C) Spot cost
(D) Opportunity cost
14- The costs that are prevailing in the market at a certain time.
(A) Future cost
(B) Specific cost
(C) Spot cost
(D) Opportunity cost
15- The ___ is the benefit that the shareholder foregoes by not putting his/her funds elsewhere because they have been retained by the management.
(A) opportunity cost
(B) Book cost
(C) Composite cost
(D) Future cost
16- Cost of capital can be ___ .
(A) explicit
(B) implicit
(C) either explicit or implicit
(D) none of the above
17- Computation of explicit cost is almost similar to the computation of ___ , with one difference.
(A) Internal Rate of Return (IRR)
(B) Net Present Value (NPV)
(C) Both (A) and (B)
(D) None of the above
18- Implicit costs may also be viewed as ___ .
(A) future costs
(B) historic costs
(C) opportunity costs
(D) marginal costs
19-Investors required rate of return(s) is (are) __ .
(A) dividend
(B) earnings per share on equity shareholders
(C) discount on debt
(D) all of the above
20-Firms may obtain equity capital in
(A) issue of additional equity shares to the public
(B) retention of earnings
(C) both (A) and (B)
(D) none of the above
21-Retained earnings is one of the ___ to raise equity finance.
(A) internal sources
(B) external sources
(C) both internal and external sources
(D) none of the above
22-Dividend capitalization approach has following limitation(s).
(A) It does not take into account the capital gains
(B) It ignores the earnings on retained earnings
(C) It does not consider future earnings
(D) All of the above
ANSWERS:
12-(B), 13-(B), 14-(C), 15-(A), 16-(C), 17-(A), 18-(C), 19-(D), 20-(C), 21-(A), 22-(D)