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Question

Which of the following factors affecting the cost of capital can be controlled by the firm?

A Tax rates Correct Answer Incorrect Answer
B Level of interest rates Correct Answer Incorrect Answer
C Dividend policy Correct Answer Incorrect Answer
D Macro environment factors Correct Answer Incorrect Answer
E All of the above Correct Answer Incorrect Answer

Solution

The cost of capital is determined by several factors, including the level of interest rates, tax rates, and the firm's dividend policy. However, out of these options, only the firm's dividend policy is under its control. The firm can determine the amount and timing of dividend payments to its shareholders based on its financial performance, investment opportunities, and other strategic considerations.

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