Question #17
Reading: Reading 17 Cost of Capital - Advanced Topics
PDF File: Reading 17 Cost of Capital - Advanced Topics.pdf
Page: 7
Status: Unattempted
Correct Answer: B
Question
Bottom-up factors that affect a company's cost of capital are most likely to include:
Answer Choices:
A. asset nature and liquidity
B. capital availability and market conditions
C. legal and regulatory considerations and tax jurisdiction
Explanation
Top-down (i.e., macro) factors that affect the cost of capital include capital availability,
market conditions, legal and regulatory considerations, and tax jurisdiction.
Bottom-up (i.e., company-specific) factors that affect the cost of capital include business or
operating risk, asset nature and liquidity, financial strength and profitability, and security
features.