Multiple Choice Questions 1. The term opportunity cost refers to: (a) The first cost of an alternative

Question:

Multiple Choice Questions
1. The term refers to:
(a) The first cost of an alternative that has been accepted for funding
(b) The total cost of an alternative that has been accepted for funding
(c) The rate of return or profit available on the next-best alternative that had to be forgone due to lack of capital funds
(d) The cost of an alternative that was not recognized as an alternative that actually represented a good opportunity
2. The is established on the basis of:
(a) The financing
(b) The weighted average of debt and equity financing
(c) The financing
(d) The financing plus the expected inflation rate
3. All of the following are examples of debt capital except:
(a) Retained earnings
(b) Long-term bonds
(c) Loan from a local bank
(d) Purchase of equipment using a credit card
4. All of the following are examples of equity capital except:
(a) Sale of preferred stock
(b) Long-term bonds
(c) Company cash on hand
(d) Use of retained earnings
5. If a public utility expands its capacity to generate electricity by obtaining $41 million from retained earnings and $30 million from municipal bond sales, the utilities’ debt-to-equity mix is closest to:
(a) 58% debt and 42% equity
(b) 73% debt and 27% equity
(c) 27% debt and 73% equity
(d) 42% debt and 58% equity

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the... Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...