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Question 1: The theory underlying the cost of capital is primarily concerned with the cost of:
A. Long-term funds and old funds.
B. Short-term funds and new funds.
C. Long-term funds and new funds.
D. Any combination of old or new, short-term or long-term funds.
Correct Answer: D
Explanation:
Choice "d" is correct. The cost of capital considers the cost of all funds - whether they are short-term,
long-term, new or old.
Choices "a", "b", and "c" are incorrect, per above.
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