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 (Agrossed 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.None of the above statements is correct.
Which of the following statements about a not-for-profit firm=s cost of capital estimate is most correct?
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