Cost of Capital MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Cost of Capital, a fundamental topic in the field of Financial Management and Financial Markets. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Cost of Capital MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Cost of Capital mcq questions that explore various aspects of Cost of Capital problems. Each MCQ is crafted to challenge your understanding of Cost of Capital principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace Financial Management and Financial Markets tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Cost of Capital MCQs are your pathway to success in mastering this essential Financial Management and Financial Markets topic.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Cost of Capital. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

So, are you ready to put your Cost of Capital knowledge to the test? Let's get started with our carefully curated MCQs!

Cost of Capital MCQs | Page 3 of 6

Q21.
For each component of capital, a required rate of return is considered as
Discuss
Answer: (a).component cost
Q22.
If the payout ratio is 0.45 then the retention ratio will be
Discuss
Answer: (a).0.55
Q23.
The stock selling price is $35, expected dividend is $5 and expected growth rate is 8% then cost of common stock would be
Discuss
Answer: (b).0.2229
Q24.
The retention ratio is 0.55 and the return on equity is 12.5% then the growth retention model would be
Discuss
Answer: (b).0.06875
Q25.
The preferred dividend is divided by preferred stock price multiply by (1-floatation cost) is used to calculate
Discuss
Answer: (d).component cost of preferred stock
Q26.
The stock selling price is $65, expected dividend is $20 and cost of common stock is 42% then expected growth rate will be
Discuss
Answer: (b).0.1123
Q27.
In retention growth model, the percent of net income firms usually pay out as shareholders dividends, is classified as
Discuss
Answer: (a).payout ratio
Q28.
In weighted average cost of capital, the rising in interest rate leads to
Discuss
Answer: (a).increase in cost of debt
Q29.
The bond risk premium is 3% and the bond yield is 10.2% then the cost of common stock will be
Discuss
Answer: (b).0.132
Q30.
The cost of new debt or marginal debt is also classified as
Discuss
Answer: (d).both a and b
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