Ch 10b - Question 1 (1 point) Jackson Inc. uses only equity...

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(1 point) Jackson Inc. uses only equity capital, and it has 2 equally-sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0%, and the composite WACC is 12.0%. All of Division A's projects have the same risk, as do all of Division B's projects. However, the projects in Division A have less risk than those in Division B. Which of the following projects should Jackson accept? Student response: Student Response Answer Choices a. A Division B project with a 13% return. b. A Division B project with a 12% return. c. A Division A project with an 11% return. d. A Division A project with a 9% return. e. A Division B project with an 11% return. Score:1 / 1 Question 2 (1 point) LePage Co. expects to earn $2.50 per share during the current year, its expected payout ratio is 55%, its expected constant dividend growth rate is 6.0%, and its common stock currently sells for $22.50 per share. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of equity from new common stock? Student response: Student Response Answer Choices a. 11.81% b. 12.43% c. 13.05% d. 13.71% e. 14.39% Score:1 / 1 Question 3 (1 point) Assume that you are a consultant to Magee Inc., and you have been provided with the following data: r RF = 4.00%; RP M = 5.00%; and b = 1.15. What is the cost of equity from retained earnings based on the CAPM approach? Student response:
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Ch 10b - Question 1 (1 point) Jackson Inc. uses only equity...

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