Ask Question, Ask an Expert


Ask Basic Finance Expert

Which of the following statements about a not-for-profit firm's cost of capital estimate is most correct?

a. Since a not-for-profit firm has no shareholders, its WACC estimate does not include a cost of equity (fund capital) estimate.

b. The capital structure weights for a not-for-profit firm are set at 50/50, because such firms can raise $1 of debt financing for each dollar of retained earnings.

c. The cost of tax-exempt debt issued by not-for-profit firms is increased ("grossed up") by 1 - T in the WACC estimate to reflect the fact that such firms do not pay taxes.

d. Equity (fund) capital has a cost that is roughly equivalent to the cost of retained earnings to similar investor-owned companies.

e. Not-for-profit firms have a zero cost of capital.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M945234

Have any Question? 

Related Questions in Basic Finance

Q1 an on-line retailing firm conducts a study into the

Q1. An on-line retailing firm conducts a study into the number of on-line purchases of footwear made during all of last year. The study wants to determine the proportion of Australians over the age of 25 who purchase foo ...

Traffic safetynbsphere is a passage from a study published

Traffic Safety:  Here is a passage from a study published by the National Highway Traffic Safety Administration in 2007. "The National Occupant Protection Use Survey (NOPUS) is the only probability-based survey of driver ...

1 briefly explain how shareholders returns are taxed twice

1. Briefly explain how shareholders' returns are taxed twice in the United States with tax laws that favor capital gains. 2. Rightists argue that increasing a firm's dividend will increase its value. Review some of the k ...

Assignment financial managementdirections be sure to save

ASSIGNMENT: Financial Management Directions: Be sure to save an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to u ...

Baker industries net income is 25000 its interest expense

Baker Industries' net income is $25,000, its interest expense is $6,000, and its tax rate is 45%. Its notes payable equals $25,000, long-term debt equals $75,000, and common equity equals $260,000. The firm finances with ...

Us interest rates during the credit crisisduring the credit

U.S. Interest Rates during the Credit Crisis : During the credit crisis, U.S. interest rates were extremely low, which enabled businesses to borrow at a low cost. Holding other factors constant, this should result in a h ...

What is a supply shockwhat is the appropriate policy

What is a supply shock? What is the appropriate policy response to a negative supply shock? What determines whether policy makers should act or do nothing in the face of adverse shocks to either aggregate demand or aggre ...

Festwalia has two types of workers low-skill workers who

Festwalia has two types of workers: low-skill workers, who earn $10 per hour, and high-skill workers, who earn $20 per hour. The government of Festwalia currently imposes a 20% proportional tax on all labor earnings. It ...

Why might a sterilized foreign exchange market intervention

Why might a sterilized foreign exchange market intervention have a greater impact on the exchange rate in times of financial stress than in times of normal market conditions?

During the great depression of the 1930s nominal interest

During the Great Depression of the 1930s, nominal interest rates were close to zero. Explain how real interest rates could be very high even though nominal interest rates were very low. (Hint: Prices fell during parts of ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate