Cost of Capital MCQs

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A major use of warrants in financing is to






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Maloney, Inc.s 1,000 par value preferred stock paid its 100 per share annual dividend on April 4 of the current year. The preferred stocks current m...






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The theory underlying the cost of capital is primarily concerned with the cost of






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Osgood Products has announced that it plans to finance future investments so that the firm will achieve an optimum capital structure. Which one of the...






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When calculating the cost of capital, the cost assigned to retained earnings should be






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Global Company Press has $150 par value preferred stock with a market price of $120 a share. The organization pays a 15 per share annual dividend. Glo...






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What is the after-tax cost of preferred stock that sells for $5 per share and offers a $0.75 dividend when the tax rate is 35%?






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What is the weighted average cost of capital for a firm with equal amounts of debt and equity financing, a 15% before-tax company cost of equity capit...






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If k is the cost of debt and t is the marginal tax rate, the after-tax cost of debt, ki, is best represented by the formula






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A firms target or optimal capital structure is consistent with which one of the following?






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What return on equity do investors seem to expect for a firm with a $50 share price, an expected dividend of $5.50, a ? of .9, and a constant growth r...






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In calculating the component costs of long-term funds, the appropriate cost of retained earnings, ignoring flotation costs, is equal to






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Which of the following, when considered individually, would generally have the effect of increasing a firm’s cost of capital? I. The firm reduces i...






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Angela Companys capital structure consists entirely of long-term debt and common equity. The cost of capital for each component is shown below. Long...






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Joint Products, Inc., a corporation with a 40% marginal tax rate, plans to issue $1,000,000 of 8% preferred stock in exchange for $1,000,000 of its 8%...






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Zeta Corporations current-year earnings are $2.00 per share. Using a discounted cash flow model, the controller determines that Zetas common stock i...






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A company has a weighted-average cost of capital of 12.8%. If the after-tax cost of debt is 8%, and the weight on debt is 20%, what is the companys c...






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Ten years ago, Ellison Group issued perpetual preferred shares with a par value of $50 and an annual dividend rate of 6%. Currently, there are no divi...






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The weighted-average cost of capital is equal to the






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Beck, Inc., issued $100,000, 15-year term bonds with a coupon rate of 8% at par. Interest is paid annually to bondholders. Becks effective income tax...






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A preferred stock is sold for $101 per share, has a face value of $100 per share, underwriting fees of $5 per share, and annual dividends of $10 per s...






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The FLF Corporation is preparing to evaluate capital expenditure proposals for the coming year. Because the firm employs discounted cash flow methods,...






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The FLF Corporation is preparing to evaluate capital expenditure proposals for the coming year. Because the firm employs discounted cash flow methods,...






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The FLF Corporation is preparing to evaluate capital expenditure proposals for the coming year. Because the firm employs discounted cash flow methods,...






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The FLF Corporation is preparing to evaluate capital expenditure proposals for the coming year. Because the firm employs discounted cash flow methods,...






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The FLF Corporation is preparing to evaluate capital expenditure proposals for the coming year. Because the firm employs discounted cash flow methods,...






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The FLF Corporation is preparing to evaluate capital expenditure proposals for the coming year. Because the firm employs discounted cash flow methods,...






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Williams, Inc., is interested in measuring its overall cost of capital and has gathered the following data. Under the terms described as follows, the ...






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Williams, Inc., is interested in measuring its overall cost of capital and has gathered the following data. Under the terms described as follows, the ...






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DQZ Telecom is considering a project for the coming year that will cost $50 million. DQZ plans to use the following combination of debt and equity to ...






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DQZ Telecom is considering a project for the coming year that will cost $50 million. DQZ plans to use the following combination of debt and equity to ...






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The common stock of the Nicolas Corporation is currently selling at $80 per share. The leadership of the company intends to pay a $4 per share dividen...






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Enert, Inc.s current capital structure is shown below. This structure is optimal, and the company wishes to maintain it. Debt 25% Preferred equity ...






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Which one of a firms sources of new capital usually has the lowest after-tax cost?






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The DCL Corporation is preparing to evaluate the capital expenditure proposals for the coming year. Because the firm employs discounted cash flow meth...






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Rogers, Inc., operates a chain of restaurants located in the Southeast. The company has steadily grown to its present size of 48 restaurants. The boar...






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Rogers, Inc., operates a chain of restaurants located in the Southeast. The company has steadily grown to its present size of 48 restaurants. The boar...






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Maylar Corporation has sold $50 million of $1,000 par value, 12% coupon bonds. The bonds were sold at a discount and the corporation received $985 per...






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Acme Corporation is selling $25 million of cumulative, non-participating preferred stock. The issue will have a par value of $65 per share with a div...






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By using the dividend growth model, estimate the cost of equity capital for a firm with a stock price of $30.00, an estimated dividend at the end of t...






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A firm seeking to optimize its capital budget has calculated its marginal cost of capital and projected rates of return on several potential projects....






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A company has made the decision to finance next years capital projects through debt rather than additional equity. The benchmark cost of capital for ...






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The firms marginal cost of capital






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Datacomp Industries, which has no current debt, has a beta of .95 for its common stock. Management is considering a change in the capital structure to...






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Lox has sold 1,000 shares of $100 par, 8% preferred stock at an issue price of $92 per share. Stock issue costs were 5 per share. Lox pays taxes at th...






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The management of Old Fenske Company (OFC has been reviewing the companys financing arrangements. The current financing mix is $750,000 of common sto...






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Pane Software, Inc., has total capital of $100 million, and its cost of capital is 12%. A new project has been proposed that will require additional c...






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Peson, Inc., a manufacturer of printers, is attempting to determine its cost of common equity for cost of capital purposes. Peson’s long-term debt i...






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A profitable firm is reviewing alternatives to raise additional capital. It estimates that it can issue debt at a yield of 6% or, alternately, issue p...






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Mackinaw Coats, Inc., is planning to issue additional shares of common stock in a public offering. The current market price of Mackinaw stock is $38, ...






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Which of the following statements is correct regarding the weighted-average cost of capital (WACC)?