Cost of Capital MCQ – Multiple Choice Questions
23-The advocates of this approach establish a relationship between earnings and market price of the share.
(A) Earnings Capitalization Approach
(B) Dividends Capitalization Approach
(C) Dividend Capitalization plus Growth Rate Approach
(D) All of the above
24- Earnings capitalization approach has the following limitation(s):
(A) Share price also does not remain constant
(B) Earning per share may not be constant
(C) All earnings are not distributed to the equity shareholders as dividends
(D) All of the above
25- The realized yield approach is based on the following assumption(s):
(A) There is no opportunity cost to investors
(B) Firms risk does not change over the period
(C) Market price of equity share does not change significantly
(D) All of the above
26- The cost of preference share capital is a function of the ___ expected by the investors.
(A) dividend
(B) payment
(C) rate of return
(D) none of the above
27- There are different types of preference shares.
(A) redeemable and irredeemable
(B) convertible and non-convertible
(C) cumulative and non-cumulative
(D) all of the above
28- Retention of earnings involves an ___ cost.
(A) opportunity
(B) spot
(C) future
(D) composite
29- Book value weights are based on the values found on the ___ .
(A) balance sheet
(B) account book
(C) both (A) and (B)
(D) none of the above
30- Following is (are) the controllable factors that affect Weighted average cost of capital (WACC).
(A) Capital Structure Policy
(B) Dividend Policy
(C) Investment Policy
(D) All of the above
31- Following is (are) the uncontrollable factors that affect Weighted average cost of capital (WACC).
(A) Tax rates
(B) Level of interest rates
(C) Market risk Premium
(D) All of the above
32- Cost of debt is ___ .
(A) interest rate
(B) tax rate
(C) market risk premium
(D) all of the above
33- Uncontrollable factors are known as
(A) External factors
(B) Internal factors
(C) both (A) and (B)
(D) none of the above
ANSWERS:
23-(A), 24-(D), 25-(D), 26-(A), 27-(D), 28-(A), 29-(A), 30-(D), 31-(D), 32-(A), 33-(A)