Asked by
rasdeep singh
on Dec 01, 2024Verified
Although the money paid to investors is both the firm's cost and the investors return:
A) certain adjustments prevent the effective cost and return from being the same.
B) adjustments must be made to keep the effective cost and return equal.
C) adjustments keep the costs of common and preferred equity equal but debt's cost is usually higher.
D) a and c
Effective Cost
The total cost of a loan or investment, taking into account all fees, interest rates, and other financial charges.
Investors Return
Investors return is the profit or loss realized from investing, typically measured as a percentage of the investment's initial value.
Firm's Cost
The total expenses incurred by a company to produce, market, and distribute its goods or services.
- Understand the concept of the cost of capital and its impact on investment returns and valuation.
Verified Answer
IB
Learning Objectives
- Understand the concept of the cost of capital and its impact on investment returns and valuation.