C-07 — Cost of Capital

What does cost of capital mean?

The expected income of the financers is considered as the organization's —

Why must the cost of capital of each source be calculated separately?

Rahim takes a bank loan at 15% interest. What is his cost of capital?

Karim finances his sewing machine from his own savings. What represents his cost of capital?

If Karim could have earned 15% by investing his money elsewhere, his cost of capital is —

Big organizations collect the necessary fund for investment from —

A company collects 5 lac taka by selling shares (expected income 18%) and 5 lac taka by bank loan (interest 12%). What is the average cost of capital?

In the same example, the cost of capital of the share-selling source is —

The amount of money the firm must earn at minimum to meet the expected income of the fund providers is called —

Cost of capital plays an important role in —

The two main applications of cost of capital are —

A company takes 50 lac taka loan from Sonali Bank at 18% interest but the business earns only 10%. What will happen?

Right calculation of cost of fund is the precondition of —

Desirable loan policy means —

In a business firm, the equity portion of the owners is called —

While selecting the capital structure, a company chooses the ratio where the cost of capital is —

Consider the following statements about the significance of cost of capital:

To implement a long-term investment decision, a company usually collects fund from —

Which one is NOT a major long-term source of fund mentioned in the text?

A public limited company usually collects long-term fund from how many major sources mentioned?

As much risky the financers think their investment to be, their expected income is —

The main source of loan capital for small businesses (grocery, hair-cutting salon, medicine shop) is —

Big business organizations collect loan capital by selling —

When a loan is taken from a bank, the cost of loan capital equals —

Sonali Bank agrees to give a grocer 10 lac taka loan at 15% interest. His pre-tax cost of loan capital is —

Interest of loan capital is deducted from —

The indirect advantage of loan capital is —

The formula for tax-adjusted cost of debt (kd) is —

Pre-tax cost of debt is 15% and tax rate is 30%. The after-tax cost of debt is —

Pre-tax interest is 12% and tax rate is 25%. After-tax cost of debt is —

Consider the following about the advantages of cost of loan capital:

Preferred shareholders receive —

Loan capital providers usually receive payments for —

Preferred shareholders receive dividend for —

Is the company always bound to give dividend to preferred shareholders?

Companies usually pay dividend to preferred shareholders —

The formula for cost of preferred share (kp) is —

A company issues 10% preferred shares of face value 1000 taka and gets 820 taka per share. Cost of preferred share is —

A company issues 8% preferred shares of face value 100 taka and gets 90 taka per share. Cost of preferred share is —

The cost of preferred shares depends on —

Consider the following statements about preferred shares:

A company can finance from ordinary share capital through —

The main difference of ordinary share capital from other sources is —

Shareholders buy ordinary shares with the hope of —

Which of the following is NOT a problem in determining the cost of ordinary capital?

There is no single way of determining the cost of —

Consider the following sources of income for an ordinary shareholder:

Consider the complexities of determining cost of ordinary share capital:

The two easy methods of calculating cost of ordinary share capital are —

In the Zero Dividend Growth Method, it is supposed that future dividend will be —

The formula of cost of ordinary share under zero growth is —

Present market price of share is 110 taka and dividend per share is 10 taka. Cost of ordinary share capital is —

Padma Ltd's ordinary share has face value 10 taka, market price 20 taka and 10% dividend declared. Cost of ordinary share capital is —

In the Constant Dividend Growth Method, it is supposed that the dividend will —

The formula of cost of ordinary share under constant growth is —

If $D_0 = 10$ taka and growth rate is 10%, what is the expected dividend after 1 year?

With $D_0 = 10$, growth rate 10%, expected dividend after 2 years is —

With $D_0 = 10$, growth rate 10%, expected dividend after 3 years is —

Market price 150 taka, current dividend 15 taka, growth rate 5%. Cost of ordinary share is —

A company pays 12 taka dividend with 10% past growth and market price 125 taka. Cost of ordinary share is —

Reserved income means —

A company earns 50 lac taka profit and keeps 25 lac taka in business. The reserved income is —

Many people think reserved income has no cost, but actually it has —

The father's bank deposit example in the text illustrates the concept of —

If the father gives the 10 lac taka deposit to his son's business, what is forgone?

The opportunity cost of reserved income arises because —

If shareholders could earn 15% by investing elsewhere, the opportunity cost of the company's reserved income is —

WACC is calculated as —

A company has 200 crore ordinary share, 200 crore loan and 100 crore preferred share. Weight of ordinary share is —

In the same case, weight of preferred share is —

Interest rate of loan is 10% and tax rate is 40%. After-tax cost of debt is —

Preferred shares dividend 8% on face value 100 taka, market price 110 taka. Cost of preferred share is —

In the book example, the WACC is calculated as $(9.3 \times 0.4) + (6 \times 0.4) + (7.27 \times 0.2)$ which equals —

What is called the minimum expected rate of return the investors require in business?

Which one is a source of long-term financing?

What is the indirect advantage of cost of debt capital?

Selecting capital mix is important —

Nannu Mia starts a pharmacy business with 2 lac taka loan at 12% interest. If tax rate is 12%, the tax-adjusted cost of debt is —

Shobnom Ltd. collects capital by selling 9% preferred shares of 5000 taka each at a 10% reduction price. The cost of capital is —

Total capital of Mr. Tutul's business is 1 crore taka, of which 60% is his own finance and the rest is loan at 15%. After getting a 20% profit opportunity he changes the structure so that an opposite relation is created between loan and own finance. What is the debt capital of Tutul's business at present?

In changing the capital structure, Mr. Tutul has considered —

Priyonti Textiles Ltd. has ordinary shares (face 10) with market price 20 taka and current dividend 2 taka per share. Using zero dividend growth method, cost of ordinary share is —

Priyonti Textiles Ltd. has loan capital at 8% and tax rate is 30%. After-tax cost of debt is —

Priyonti Textiles total capital 10 crore; ordinary share capital 5 crore. Weight of ordinary share is —

Priyonti Textiles: loan capital 2 crore out of total 10 crore. Weight of loan capital is —

Aryan Company issues 15% preferred shares of face value 100 taka, sold at 500 taka each. Cost of preferred capital is —

Aryan Company took a bank loan at 13% interest. With tax rate 30%, after-tax cost of debt is —

Aryan Company's provision fund of 22 lakh is deposited at 10% annual interest. The opportunity cost of using this fund is —

Aryan Company chose a bank loan (after-tax cost 9.1%) instead of withdrawing the provision fund (opportunity cost 10%). The decision is —

Cost of capital is mainly important for —

Optimum loan/credit policy means —

Capital mix refers to —

Tax-adjusted cost of debt formula adjusts the interest rate for —

The opportunity cost of retained earnings refers to —

The cost of preferred shares is calculated as the ratio of —