Question

Which of the following affect the weighted average cost of capital?

Select one:

A. Interest on bank loans

B. Dividends expected by investors

C. Expected increases in the value of stock in the company

D. Bond interest payments

E. All of the above

Answer 1

	The Following factors affecting the Weighted Average Cost of Capital:
1	Capital Structure Policy (Expected Increase In the value of stock in the company):
	The Change in cost of value of Stock leads to higher valuations. This in terms impacts the cost of equity.
2	Dividend Policy:
	As the payout ratio of the company increases the breakpoint between lower cost internally generated
	equity and newly equity is lowered.
3	Level of Interest Rates:
	As the level of interest rates changes, this directly impacts the cost of debt and hence impacts the cost of debt
4	Bonds Interest Payments:
	As the level of interest rates changes, this directly impacts the cost of Bonds and hence impacts the cost of Bonds
	Hence All given factors impacts the weighted average cost of Capital.
	Answer is E All of Above