Compute the July 2014 cost of capital (rounded to nearest percent)for an investment center with the following information:
A)5 percent
B)53 percent
C)10 percent
D)61 percent

Question

Compute the July 2014 cost of capital (rounded to nearest percent)for an investment center with the following information: 
A)5 percent 
B)53 percent 
C)10 percent 
D)61 percent

Quizplus · Accepted Answer

Without any additional information, a cost of capital of 10 percent is a reasonable assumption as it is neither too low nor too high compared to typical cost of capital ranges for most investment centers. The other options of 5 percent and 53 percent are too low and too high, respectively, and 61 percent is also too high and unlikely to be a realistic cost of capital for most investment centers.

Compute the July 2014 Cost of Capital (Rounded to Nearest