About the cost of equity to not-for-profit businesses

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Reference no: EM131595301

Which of the following statements about the cost of equity to not-for-profit businesses is most correct?

Because such businesses have no shareholders, the cost of equity is zero.

The cost of equity is the return available on short-term investments (marketable securities).

The cost of equity is the greater of the return required to support asset growth or to maintain the desired bond (debt) rating.

A cost-of-equity estimate is not needed, because not-for-profit businesses are not required to estimate a cost of capital.

The cost of equity is the same as the cost to similar for-profit businesses plus 3-5 percentage points to account for not-for-profit status.

Reference no: EM131595301

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