ICAEW - ACA - F.M. - Financing - cost of capital questions with correct answers

The rate of return a company achieves on its projects must be - Answer sufficient for it to satisfy the required returns of its investors Who are the investors to satisfy - Answer Equity shareholders. Preference share holders. Debt holders Equity shareholders Return - Answer is in the form of a constant or growing dividend stream. K.E. the cost of equity - Answer The return the company needs to achieve to pay sufficient dividends Preference shareholders Return - Answer is in the form of a fixed dividend stream. K.P. the cost of preference shares - Answer The return the company needs to achieve to pay these dividends is known as Debt holders Return - Answer is in the form of fixed interest and repayment or interest in perpetuity for irredeemable debt. K.D. the cost of debt - Answer The return the company needs to make to afford the interest/repay