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Cost of Capital MCQs 2026

74 questions with detailed answers · 26 from past papers · 8 quiz batches available

📚 Finance Mcqs 📄 26 Past-Paper Qs ✓ Free · No Login Needed
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Read each question, think about the answer, then click Show Answer to reveal the correct option and explanation. Load 10 at a time so it stays manageable — perfect for one-topic study sessions on the bus or during a break.

Page 1 of 1 Questions 1–10 of 74
  1. Q1 Past Paper · PPSC/FPSC/NTS easy

    Weighted Average Cost of Capital (WACC) represents

    1. A average required return on all capital sources weighted by market values
    2. B book value cost of equity only
    3. C bank lending rate exclusively
    4. D historical coupon rate only
    💡 Explanation:

    WACC blends cost of debt and equity.

  2. Q2 Past Paper · PPSC/FPSC/NTS medium

    Cost of equity using CAPM equals

    1. A book value per share
    2. B risk-free rate plus beta times market risk premium
    3. C dividend yield only
    4. D interest rate on bank loan
    💡 Explanation:

    Ke = Rf + β(Rm - Rf).

  3. Q3 medium

    After-tax cost of debt equals

    1. A pre-tax yield divided by tax rate
    2. B coupon rate plus inflation only
    3. C pre-tax yield multiplied by (1 minus tax rate)
    4. D face value minus market price
    💡 Explanation:

    Interest tax shield reduces effective cost.

  4. Q4 Past Paper · PPSC/FPSC/NTS medium

    WACC is used as discount rate when

    1. A project is much riskier without adjustment
    2. B only equity financing is used in isolation
    3. C project is in unrelated industry without beta adjustment
    4. D project risk matches the firm average risk
    💡 Explanation:

    Risk-adjusted hurdle rates are required.

  5. Q5 hard

    Marginal cost of capital schedule shows

    1. A constant WACC regardless of funding size
    2. B WACC rising as more capital is raised
    3. C declining equity cost always
    4. D zero cost of retained earnings incorrectly
    💡 Explanation:

    Flotation costs and supply effects raise MCC.

  6. Q6 Past Paper · PPSC/FPSC/NTS medium

    Flotation costs on new equity issue

    1. A increase the effective cost of external equity
    2. B reduce required return on equity
    3. C are irrelevant to WACC
    4. D eliminate need for CAPM
    💡 Explanation:

    Net proceeds are less than gross issue.

  7. Q7 medium

    Risk-free rate in Pakistan CAPM context is often proxied by

    1. A corporate junk bond yield
    2. B yield on government securities such as PIBs
    3. C microfinance lending rate
    4. D credit card APR
    💡 Explanation:

    Sovereign instruments proxy risk-free asset.

  8. Q8 Past Paper · PPSC/FPSC/NTS medium

    Beta measures

    1. A total unsystematic risk only
    2. B liquidity of shares only
    3. C systematic risk relative to the market portfolio
    4. D accounting leverage only
    💡 Explanation:

    β captures market-related volatility.

  9. Q9 hard

    Hamada equation relates

    1. A inventory turnover and beta
    2. B dividend yield and beta
    3. C levered and unlevered beta through financial leverage
    4. D tax rate and inventory
    💡 Explanation:

    Leverage increases equity beta.

  10. Q10 Past Paper · PPSC/FPSC/NTS medium

    Cost of retained earnings equals

    1. A zero because no cash leaves firm
    2. B coupon rate on bonds
    3. C prime lending rate only
    4. D cost of new common equity minus flotation cost adjustment conceptually
    💡 Explanation:

    Opportunity cost to existing shareholders.

  11. Q11 hard

    Pure play approach estimates project cost of capital using

    1. A beta of unrelated retail chain
    2. B historical book debt ratio only
    3. C beta of firms in same industry
    4. D auditor fee schedule
    💡 Explanation:

    Comparable industry betas proxy project risk.

  12. Q12 Past Paper · PPSC/FPSC/NTS medium

    Divisional cost of capital differs from corporate WACC when

    1. A all divisions are identical
    2. B division has different business risk profile
    3. C tax rate is zero
    4. D no debt exists
    💡 Explanation:

    Different risks warrant different hurdle rates.

  13. Q13 hard

    WACC calculation 1: 25% debt at 7% pre-tax, 75% equity at 13%, tax 29%. WACC is approximately

    1. A 10.99%
    2. B 15.0%
    3. C 6.0%
    4. D 20.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  14. Q14 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 3: estimating equity risk premium estimation for a infrastructure SPV requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C setting cost of equity equal to last dividend yield only
    4. D subtracting PIB/T-bill yield from expected KSE-100 return
    💡 Explanation:

    Problem 3: equity risk premium estimation.

  15. Q15 hard

    WACC calculation 4: 49% debt at 10% pre-tax, 51% equity at 16%, tax 29%. WACC is approximately

    1. A 11.64%
    2. B 15.6%
    3. C 6.6%
    4. D 26.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  16. Q16 medium

    Cost of capital problem 5: estimating equity risk premium estimation for a multinational subsidiary requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C setting cost of equity equal to last dividend yield only
    4. D subtracting PIB/T-bill yield from expected KSE-100 return
    💡 Explanation:

    Problem 5: equity risk premium estimation.

  17. Q17 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 6: estimating equity risk premium estimation for a utility company requires

    1. A subtracting PIB/T-bill yield from expected KSE-100 return
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 6: equity risk premium estimation.

  18. Q18 hard

    WACC calculation 7: 73% debt at 7% pre-tax, 27% equity at 19%, tax 29%. WACC is approximately

    1. A 8.76%
    2. B 12.8%
    3. C 3.8%
    4. D 26.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  19. Q19 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 8: estimating debt rating spread over T-bills for a PSX-listed textile firm requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C adding default risk premium to risk-free government yield
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 8: debt rating spread over T-bills.

  20. Q20 medium

    Cost of capital problem 9: estimating debt rating spread over T-bills for a private hospital chain requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C setting cost of equity equal to last dividend yield only
    4. D adding default risk premium to risk-free government yield
    💡 Explanation:

    Problem 9: debt rating spread over T-bills.

  21. Q21 medium

    Cost of capital problem 30: estimating flotation cost adjustment for a private hospital chain requires

    1. A reducing proceeds per share when computing cost of new equity
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 30: flotation cost adjustment.

  22. Q22 Past Paper · PPSC/FPSC/NTS hard

    WACC calculation 31: 49% debt at 10% pre-tax, 51% equity at 16%, tax 29%. WACC is approximately

    1. A 15.6%
    2. B 6.6%
    3. C 26.0%
    4. D 11.64%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  23. Q23 medium

    Cost of capital problem 32: estimating flotation cost adjustment for a family-owned trading house requires

    1. A using book values exclusively without market data
    2. B reducing proceeds per share when computing cost of new equity
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 32: flotation cost adjustment.

  24. Q24 medium

    Cost of capital problem 33: estimating flotation cost adjustment for a multinational subsidiary requires

    1. A using book values exclusively without market data
    2. B reducing proceeds per share when computing cost of new equity
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 33: flotation cost adjustment.

  25. Q25 Past Paper · PPSC/FPSC/NTS hard

    WACC calculation 34: 73% debt at 13% pre-tax, 27% equity at 19%, tax 29%. WACC is approximately

    1. A 15.9%
    2. B 6.9%
    3. C 32.0%
    4. D 11.87%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  26. Q26 medium

    Cost of capital problem 35: estimating flotation cost adjustment for a leasing firm requires

    1. A reducing proceeds per share when computing cost of new equity
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 35: flotation cost adjustment.

  27. Q27 medium

    Cost of capital problem 36: estimating CAPM beta estimation for a PSX-listed textile firm requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C regressing stock returns against market index or using industry comparables
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 36: CAPM beta estimation.

  28. Q28 Past Paper · PPSC/FPSC/NTS hard

    WACC calculation 37: 25% debt at 10% pre-tax, 75% equity at 13%, tax 29%. WACC is approximately

    1. A 15.5%
    2. B 6.5%
    3. C 11.53%
    4. D 23.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  29. Q29 medium

    Cost of capital problem 38: estimating CAPM beta estimation for a infrastructure SPV requires

    1. A using book values exclusively without market data
    2. B regressing stock returns against market index or using industry comparables
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 38: CAPM beta estimation.

  30. Q30 medium

    Cost of capital problem 39: estimating CAPM beta estimation for a family-owned trading house requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C regressing stock returns against market index or using industry comparables
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 39: CAPM beta estimation.

  31. Q31 Past Paper · PPSC/FPSC/NTS hard

    WACC calculation 40: 49% debt at 13% pre-tax, 51% equity at 16%, tax 29%. WACC is approximately

    1. A 12.68%
    2. B 16.7%
    3. C 7.7%
    4. D 29.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  32. Q32 medium

    Cost of capital problem 41: estimating CAPM beta estimation for a utility company requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C regressing stock returns against market index or using industry comparables
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 41: CAPM beta estimation.

  33. Q33 medium

    Cost of capital problem 42: estimating CAPM beta estimation for a leasing firm requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C regressing stock returns against market index or using industry comparables
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 42: CAPM beta estimation.

  34. Q34 Past Paper · PPSC/FPSC/NTS hard

    WACC calculation 43: 73% debt at 11% pre-tax, 27% equity at 19%, tax 29%. WACC is approximately

    1. A 14.8%
    2. B 5.8%
    3. C 30.0%
    4. D 10.83%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  35. Q35 medium

    Cost of capital problem 44: estimating target capital structure weights for a private hospital chain requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C using market-value weights of debt and equity not book values
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 44: target capital structure weights.

  36. Q36 medium

    Cost of capital problem 45: estimating target capital structure weights for a infrastructure SPV requires

    1. A using market-value weights of debt and equity not book values
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 45: target capital structure weights.

  37. Q37 Past Paper · PPSC/FPSC/NTS hard

    WACC calculation 46: 25% debt at 14% pre-tax, 75% equity at 13%, tax 29%. WACC is approximately

    1. A 16.2%
    2. B 7.2%
    3. C 12.24%
    4. D 27.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  38. Q38 medium

    Cost of capital problem 47: estimating target capital structure weights for a multinational subsidiary requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C using market-value weights of debt and equity not book values
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 47: target capital structure weights.

  39. Q39 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 48: estimating target capital structure weights for a utility company requires

    1. A using market-value weights of debt and equity not book values
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 48: target capital structure weights.

  40. Q40 hard

    WACC calculation 49: 49% debt at 11% pre-tax, 51% equity at 16%, tax 29%. WACC is approximately

    1. A 16.0%
    2. B 7.0%
    3. C 11.99%
    4. D 27.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  41. Q41 hard

    WACC calculation 10: 25% debt at 10% pre-tax, 75% equity at 13%, tax 29%. WACC is approximately

    1. A 15.5%
    2. B 6.5%
    3. C 11.53%
    4. D 23.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  42. Q42 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 11: estimating debt rating spread over T-bills for a family-owned trading house requires

    1. A adding default risk premium to risk-free government yield
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 11: debt rating spread over T-bills.

  43. Q43 medium

    Cost of capital problem 12: estimating debt rating spread over T-bills for a multinational subsidiary requires

    1. A using book values exclusively without market data
    2. B adding default risk premium to risk-free government yield
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 12: debt rating spread over T-bills.

  44. Q44 hard

    WACC calculation 13: 49% debt at 8% pre-tax, 51% equity at 16%, tax 29%. WACC is approximately

    1. A 14.9%
    2. B 10.94%
    3. C 5.9%
    4. D 24.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  45. Q45 medium

    Cost of capital problem 15: estimating retained earnings opportunity cost for a PSX-listed textile firm requires

    1. A using book values exclusively without market data
    2. B treating retained earnings as costing what shareholders could earn elsewhere
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 15: retained earnings opportunity cost.

  46. Q46 hard

    WACC calculation 16: 73% debt at 11% pre-tax, 27% equity at 19%, tax 29%. WACC is approximately

    1. A 14.8%
    2. B 5.8%
    3. C 10.83%
    4. D 30.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  47. Q47 medium

    Cost of capital problem 18: estimating retained earnings opportunity cost for a family-owned trading house requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C treating retained earnings as costing what shareholders could earn elsewhere
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 18: retained earnings opportunity cost.

  48. Q48 hard

    WACC calculation 19: 25% debt at 8% pre-tax, 75% equity at 13%, tax 29%. WACC is approximately

    1. A 15.2%
    2. B 6.2%
    3. C 21.0%
    4. D 11.17%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  49. Q49 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 20: estimating retained earnings opportunity cost for a utility company requires

    1. A using book values exclusively without market data
    2. B treating retained earnings as costing what shareholders could earn elsewhere
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 20: retained earnings opportunity cost.

  50. Q50 medium

    Cost of capital problem 21: estimating retained earnings opportunity cost for a leasing firm requires

    1. A treating retained earnings as costing what shareholders could earn elsewhere
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 21: retained earnings opportunity cost.

  51. Q51 hard

    WACC calculation 22: 49% debt at 12% pre-tax, 51% equity at 16%, tax 29%. WACC is approximately

    1. A 16.3%
    2. B 12.33%
    3. C 7.3%
    4. D 28.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  52. Q52 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 23: estimating project-specific hurdle rate for a private hospital chain requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C setting cost of equity equal to last dividend yield only
    4. D adjusting WACC upward or downward for project risk relative to firm average
    💡 Explanation:

    Problem 23: project-specific hurdle rate.

  53. Q53 medium

    Cost of capital problem 24: estimating project-specific hurdle rate for a infrastructure SPV requires

    1. A using book values exclusively without market data
    2. B adjusting WACC upward or downward for project risk relative to firm average
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 24: project-specific hurdle rate.

  54. Q54 hard

    WACC calculation 25: 73% debt at 9% pre-tax, 27% equity at 19%, tax 29%. WACC is approximately

    1. A 13.8%
    2. B 4.8%
    3. C 28.0%
    4. D 9.79%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  55. Q55 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 26: estimating project-specific hurdle rate for a multinational subsidiary requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C setting cost of equity equal to last dividend yield only
    4. D adjusting WACC upward or downward for project risk relative to firm average
    💡 Explanation:

    Problem 26: project-specific hurdle rate.

  56. Q56 medium

    Cost of capital problem 27: estimating project-specific hurdle rate for a utility company requires

    1. A adjusting WACC upward or downward for project risk relative to firm average
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 27: project-specific hurdle rate.

  57. Q57 Past Paper · PPSC/FPSC/NTS hard

    WACC calculation 28: 25% debt at 12% pre-tax, 75% equity at 13%, tax 29%. WACC is approximately

    1. A 15.9%
    2. B 11.88%
    3. C 6.9%
    4. D 25.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  58. Q58 medium

    Cost of capital problem 29: estimating flotation cost adjustment for a PSX-listed textile firm requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C setting cost of equity equal to last dividend yield only
    4. D reducing proceeds per share when computing cost of new equity
    💡 Explanation:

    Problem 29: flotation cost adjustment.

  59. Q59 medium

    Cost of capital problem 50: estimating equity risk premium estimation for a PSX-listed textile firm requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C setting cost of equity equal to last dividend yield only
    4. D subtracting PIB/T-bill yield from expected KSE-100 return
    💡 Explanation:

    Problem 50: equity risk premium estimation.

  60. Q60 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 51: estimating equity risk premium estimation for a private hospital chain requires

    1. A subtracting PIB/T-bill yield from expected KSE-100 return
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 51: equity risk premium estimation.

  61. Q61 hard

    WACC calculation 52: 73% debt at 15% pre-tax, 27% equity at 19%, tax 29%. WACC is approximately

    1. A 16.9%
    2. B 7.9%
    3. C 12.9%
    4. D 34.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  62. Q62 medium

    Cost of capital problem 53: estimating equity risk premium estimation for a family-owned trading house requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C setting cost of equity equal to last dividend yield only
    4. D subtracting PIB/T-bill yield from expected KSE-100 return
    💡 Explanation:

    Problem 53: equity risk premium estimation.

  63. Q63 hard

    WACC calculation 55: 25% debt at 12% pre-tax, 75% equity at 13%, tax 29%. WACC is approximately

    1. A 15.9%
    2. B 11.88%
    3. C 6.9%
    4. D 25.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  64. Q64 medium

    Cost of capital problem 56: estimating equity risk premium estimation for a leasing firm requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C subtracting PIB/T-bill yield from expected KSE-100 return
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 56: equity risk premium estimation.

  65. Q65 hard

    WACC calculation 58: 49% debt at 15% pre-tax, 51% equity at 16%, tax 29%. WACC is approximately

    1. A 17.4%
    2. B 8.4%
    3. C 13.38%
    4. D 31.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  66. Q66 medium

    Cost of capital problem 59: estimating debt rating spread over T-bills for a infrastructure SPV requires

    1. A using book values exclusively without market data
    2. B adding default risk premium to risk-free government yield
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 59: debt rating spread over T-bills.

  67. Q67 hard

    WACC calculation 61: 73% debt at 13% pre-tax, 27% equity at 19%, tax 29%. WACC is approximately

    1. A 15.9%
    2. B 11.87%
    3. C 6.9%
    4. D 32.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  68. Q68 medium

    Cost of capital problem 62: estimating debt rating spread over T-bills for a utility company requires

    1. A adding default risk premium to risk-free government yield
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 62: debt rating spread over T-bills.

  69. Q69 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 63: estimating debt rating spread over T-bills for a leasing firm requires

    1. A adding default risk premium to risk-free government yield
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 63: debt rating spread over T-bills.

  70. Q70 hard

    WACC calculation 64: 25% debt at 16% pre-tax, 75% equity at 13%, tax 29%. WACC is approximately

    1. A 16.6%
    2. B 12.59%
    3. C 7.6%
    4. D 29.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  71. Q71 medium

    Cost of capital problem 65: estimating retained earnings opportunity cost for a private hospital chain requires

    1. A treating retained earnings as costing what shareholders could earn elsewhere
    2. B using book values exclusively without market data
    3. C assuming cost of debt equals coupon with no tax adjustment
    4. D setting cost of equity equal to last dividend yield only
    💡 Explanation:

    Problem 65: retained earnings opportunity cost.

  72. Q72 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 66: estimating retained earnings opportunity cost for a infrastructure SPV requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C setting cost of equity equal to last dividend yield only
    4. D treating retained earnings as costing what shareholders could earn elsewhere
    💡 Explanation:

    Problem 66: retained earnings opportunity cost.

  73. Q73 hard

    WACC calculation 67: 49% debt at 13% pre-tax, 51% equity at 16%, tax 29%. WACC is approximately

    1. A 16.7%
    2. B 12.68%
    3. C 7.7%
    4. D 29.0%
    💡 Explanation:

    WACC = wd×kd×(1-T) + we×ke.

  74. Q74 Past Paper · PPSC/FPSC/NTS medium

    Cost of capital problem 68: estimating retained earnings opportunity cost for a multinational subsidiary requires

    1. A using book values exclusively without market data
    2. B assuming cost of debt equals coupon with no tax adjustment
    3. C setting cost of equity equal to last dividend yield only
    4. D treating retained earnings as costing what shareholders could earn elsewhere
    💡 Explanation:

    Problem 68: retained earnings opportunity cost.

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