Asked by Chae-Lynn Normore on May 20, 2024
Verified
Cost of capital calculations assume that capital is usually raised:
A) in the proportions of either the target or the existing capital structure.
B) by selling as much as possible of one security at a time.
C) in the proportions of the existing capital structure.
D) in the proportions of the target capital structure.
Capital Structure
The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, which is used to finance its overall operations and growth.
Target Capital Structure
The optimal mix of debt, equity, and other securities a company aims to hold, balancing risk and return to maximise shareholder value.
- Understand the relevance of target and existing capital structure in raising capital.
Verified Answer
MF
milan franciscoMay 27, 2024
Final Answer :
A
Explanation :
Cost of capital calculations typically assume that capital is raised in the proportions of either the target or the existing capital structure, depending on the company's financial strategy and market conditions. This approach helps in maintaining a balanced and optimal capital structure.
Learning Objectives
- Understand the relevance of target and existing capital structure in raising capital.