93%(41)38 out of 41 people found this document helpful
This preview shows page 1 - 4 out of 10 pages.
Financial ManagementBUS5440 | Term: Spring 2 2015 Student Access: 3.9.2015 12:00 AM EDT - 5.3.2015 11:59 PM EDT | Section: 3QUESTION:1[QUESTION BANK ID:269413]TYPE:MULTIPLE CHOICECORRECTWhich of the following statements is correct? << HIDE ANSWERSAWhen calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are deductible by the paying corporationBAll else equal, an increase in a company’s stock price will increase its marginal cost of retained earnings, rsCAll else equal, an increase in a company’s stock price will increase its marginal cost of new common equity, reDSince the money is readily available, the after-tax cost of retained earnings is usually much lower than theafter-tax cost of debtEIf a company’s tax rate increases but the YTM on its noncallable bonds remains the same, the after-tax cost of its debt will fallQUESTION:2[QUESTION BANK ID:269417]TYPE:MULTIPLE CHOICECORRECT
Which of the following statements is correct? << HIDE ANSWERSAA change in a company’s target capital structure cannot affect its WACCBWACC calculations should be based on the before-tax costs of all the individual capital componentsCFlotation costs associated with issuing new common stock normally reduce the WACCDIf a company’s tax rate increases, then, all else equal, its weighted average cost of capital will declineEAn increase in the risk-free rate will normally lower the marginal costs of both debt and equity financingQUESTION:3[QUESTION BANK ID:269419]TYPE:MULTIPLE CHOICECORRECTWhich of the following statements is correct? << HIDE ANSWERS