{"id":33745,"date":"2024-04-15T09:21:05","date_gmt":"2024-04-15T09:21:05","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=33745"},"modified":"2024-04-15T09:21:05","modified_gmt":"2024-04-15T09:21:05","slug":"which-of-the-following-statement-is-not-correct","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statement-is-not-correct\/","title":{"rendered":"Which of the following statement is not correct?"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a98e21a563b7\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"false\">\r\n                    The cost of capital is required rate of return to ascertain the value of the firm                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    Different sources of funds have a specific cost of capital related to that source only                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"true\">\r\n                    Cost of capital does not comprise any risk premium                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    Cost of capital is basic data for NPV technique                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is C. Cost of capital does not comprise any risk premium.<\/p>\n<p>The cost of capital is the rate of return that a company needs to earn on its investments in order to satisfy its investors. It is a measure of the riskiness of a company&#8217;s investments and is used to calculate the value of a company&#8217;s equity.<\/p>\n<p>The cost of capital is made up of two components: the risk-free rate of return and the risk premium. The risk-free rate of return is the rate of return that an investor can earn on a risk-free investment, such as a government bond. The risk premium is the additional return that an investor requires to invest in a risky investment, such as a company&#8217;s stock.<\/p>\n<p>The cost of capital is a critical concept in finance and is used in a variety of financial decisions, such as capital budgeting, valuation, and mergers and acquisitions.<\/p>\n<p>Here is a brief explanation of each option:<\/p>\n<p>A. The cost of capital is required rate of return to ascertain the value of the firm. This is correct. The cost of capital is the rate of return that a company needs to earn on its investments in order to satisfy its investors. It is a measure of the riskiness of a company&#8217;s investments and is used to calculate the value of a company&#8217;s equity.<\/p>\n<p>B. Different sources of funds have a specific cost of capital related to that source only. This is correct. The cost of capital is a weighted average of the costs of the different sources of funds that a company uses. The weights are based on the relative proportions of each source of funds in the company&#8217;s capital structure.<\/p>\n<p>C. Cost of capital does not comprise any risk premium. This is incorrect. The cost of capital is made up of two components: the risk-free rate of return and the risk premium. The risk-free rate of return is the rate of return that an investor can <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div> earn on a risk-free investment, such as a government bond. The risk premium is the additional return that an investor requires to invest in a risky investment, such as a company&#8217;s stock.<\/p>\n<p>D. Cost of capital is basic data for <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> NPV technique. This is correct. The cost of capital is one of the inputs into the net present value (NPV) technique. The NPV technique is a method of evaluating capital investments. It calculates the present value of the future cash flows from an investment and compares it to the initial investment cost. If the NPV is positive, the investment is considered to be profitable.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Join Our Telegram Channel Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[700],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Which of the following statement is not correct?<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/which-of-the-following-statement-is-not-correct\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Which of the following 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