Question

Introduction Companies issue bonds, preferred stock, and common equity to aise capital to invest in capital budgeting projects. Capital is__________necessary factor of production and like any other factor, it has a cost. This cost is equal to the _______ the applicable security. The rates of return that investors require on bonds, preferred stocks, and common equity represent the costs of those securities to the firm. Companies estimate the required returns on their securities, calculate a weighted average of the costs of their different types of capital, and use this average cost for capital budgeting purposes. required return on rate: When calculating om operations when The firm's primary financial objective is to _______ shareholder value. To do this, companies invest in projects that earn___________their cost of capital. So, the cost of capital is often referred to as the __________and accruals, which a se spontaneously we hted average cost of capital WA C our concern is with capital that must be provided by ________interest-bearing debt preferred stock and common equity. capital budgeting projects are undertaken, are not included as part of total invested capital because they do not come directly from investors. Which of the following would be included in the caculation of total invested capital?
a. Notes payable
b. Taxes payable
c. Retained earnings
d. Responses a and c would be included in the calculation of total invested capital.
e. None of the above would be included in the cakulation of total invested capital.

Answer 1

Answer:

MARGINAL INVESTORS required return on the applicable security. The rates rates of return that investors require on bonds, preferred stocks, and common equity represent the costs of those securities to the firm. Companies estimate the required returns on their securities, calculate a weighted average of the costs of their different types of capital, and use this average cost for capital budgeting purposes.

Explanation: