For an unlevered firm,the cost of capital of the firm can be determined by using the:
A)yield on the traded debt.
B)Capital Asset Pricing Model.
C)dividend yield.
D)preferred stock yield.
E)market value of equity.

Question

Quizplus · Accepted Answer

The cost of capital of an unlevered firm is determined by the Capital Asset Pricing Model (CAPM), which takes into account the risk-free rate, the market rate of return, and the beta of the specific company. The other options, such as yield on traded debt, dividend yield, preferred stock yield, or market value of equity, do not provide a comprehensive analysis of the cost of capital of an unlevered firm.

For an Unlevered Firm,the Cost of Capital of the Firm