GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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dividend yield method
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earning yield method
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growth in dividend method
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all of the above
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Detailed explanation-1: -To determine cost of capital, business leaders, accounting departments, and investors must consider three factors: cost of debt, cost of equity, and weighted average cost of capital (WACC).
Detailed explanation-2: -Cost of capital is the cost of company’s fund including debt and equity. From investors point of view, it is the required rate of return on the amount invested by the investors.
Detailed explanation-3: -The cost of capital of a firm can be analyzed as explicit cost and implicit cost of capital. The explicit cost of capital of a particular source may be defined in terms of the interest or dividend that the firm has to pay to the suppliers of funds.
Detailed explanation-4: -Cost of Capital – Cost of Debt, Preference Share Capital, Equity Share Capital and Retained Earnings. These sources of finance are called components of cost of capital.
Detailed explanation-5: -Equity shares has the highest cost of capital.