{"id":33693,"date":"2024-04-15T09:20:23","date_gmt":"2024-04-15T09:20:23","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=33693"},"modified":"2024-04-15T09:20:23","modified_gmt":"2024-04-15T09:20:23","slug":"which-one-of-the-following-is-not-the-internal-factor-affecting-the-weighted-average-cost-of-capital-of-a-firm","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-is-not-the-internal-factor-affecting-the-weighted-average-cost-of-capital-of-a-firm\/","title":{"rendered":"Which one of the following is not the internal factor affecting the weighted average cost of capital of a firm?"},"content":{"rendered":"

[amp_mcq option1=”Investment policy of the firm” option2=”Capital structure of the firm” option3=”Dividend policy followed” option4=”Market risk premium for the firm” correct=”option4″]<\/p>\n

The correct answer is D. Market risk premium for the firm.<\/p>\n

The weighted average cost of capital (WACC) is a measure of a company’s cost of capital, which is used to evaluate a company’s potential projects or to compare the value of different companies. The WACC is calculated as a weighted average of the costs of debt and equity, where the weights are the proportions of debt and equity in the company’s capital structure.<\/p>\n

The market risk premium is the additional return that investors demand for investing in risky assets over risk-free assets. The market risk premium is not an internal factor because it is determined by the market, not by the company.<\/p>\n

The other options are all internal factors that affect a company’s WACC. The investment policy of the firm determines how much money the company invests in new projects. The capital structure of the firm determines how much debt and equity the company uses to finance its assets. The dividend policy followed by the firm determines how much money the company pays out to shareholders in dividends.<\/p>\n

All of these factors affect the WACC because they affect the risk of the company’s cash flows. The higher the risk of the company’s cash flows, the higher the WACC.<\/p>\n","protected":false},"excerpt":{"rendered":"

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