Chapter 5 – Cost of Capital

Questions
SECTION A – MULTIPLE CHOICE QUESTIONS

1. Which of the following is not part of a firm’s capital structure?
   (a) Assets
   (b) Debt
   (c) Equity
   (d) None of the above. (I.e. all of the above are part of the firm’s capital structure.)
2. Which of the following needs to be adjusted for tax in calculating a firm’s weighted average cost of capital?
   (a) The cost of debt
   (b) The cost of preference shares
   (c) The cost of ordinary shares
   (d) All of the above.
3. Which of the following is not an appropriate method of determining the cost of debt for a firm in calculating its
   WACC?
   (a) The debt‐rating approach
   (b) The coupon rate
   (c) The yield to maturity
   (d) None of the above. (I.e. All of the above are appropriate methods of determining the cost of debt for a
   firm in calculating its WACC.)
4. Which of the following is not something t
   

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