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Setler79 [48]
3 years ago
15

Ted is trying to decide what cost of capital he should assign to a project. Which one of the following should be his primary con

sideration in this decision? Answer a. Amount of debt used to finance the projectb. Use, or lack thereof, of preferred stock to finance the projectc. Mix of funds used to finance the projectd. Risk level of the projecte. Length of the project's life
Business
1 answer:
MrMuchimi3 years ago
5 0

Answer:

c. Mix of funds used to finance the project.

Explanation:

Most of the time businesses don't have the required funds to invest in projects especially capital intensive projects. So businesses raise long term finance from various sources, for example, from capital markets through issuance of shares/stocks and from debt sources through raising long term loans and debt instruments like bonds.

Now each source of finance has a different cost to the business depending upon the likely risks associated with each source of finance and nature of business itself. Therefore, businesses strive to assign such a cost of capital that primarily recovers the cost of finance and generate surplus wealth for the business. So the decision of what cost of capital should be assigned to a project primarily depends upon the the mix of funds used.

Secondly, risk level of the project might somehow effect the required rate of return expected by shareholders and/or debt providers but may not be the primary consideration in this decision.

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Procrastinating
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3 years ago
The Home and Garden (HG) chain of superstores imports decorative planters from Italy. Demand for the planters is stable and aver
Korolek [52]

Answer:

The average inventory which HG should carry during the year is 5,000 units.

Explanation:

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6 0
2 years ago
What is the relationship between the gross public debt and the net public​ debt?
timofeeve [1]
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3 years ago
What is the best career to go for?
Soloha48 [4]

Answer: Well what things are you interested in?

Explanation:

6 0
3 years ago
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A company issued common stock and preferred stock. Projected growth rate of the common stock is 5%. The current quarterly divide
mr_godi [17]

Answer:

8%

Explanation:

If the current quarterly dividend on preferred stock = $1.60, that means that the current yearly dividend = $1.60 x 4 quarters = $6.40

Since the yearly dividend = $6.40 and the current market price of preferred stock is $80, its expected rate of return = $6.40 / $80 = 8%

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