Ch 10a - Question 1(1 point You were hired as a consultant...

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Question 1 (1 point) You were hired as a consultant to Kroncke Company, whose target capital structure is 40% debt, 10% preferred, and 50% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 13.25%. The firm will not be issuing any new stock. What is its WACC? Student response: Student Response Answer Choices a. 9.48% b. 9.78% c. 10.07% d. 10.37% e. 10.68% Score:1 / 1 Question 2 (1 point) Which of the following statements is CORRECT? Student response: Student Respons e Answer Choices a. A change in a company's target capital structure cannot affect its WACC. b . WACC calculations should be based on the before-tax costs of all the individual capital components. c. Flotation costs associated with issuing new common stock normally reduce the WACC. d . If a company's tax rate increases, then, all else equal, its weighted average cost of capital will decline. e. An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.
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Score:1 / 1 Question 3 (1 point) Scanlon Inc.'s CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following data: r RF = 5.00%; RP M = 6.00%; and b = 0.90. Based on the CAPM approach, what is the cost of equity from retained earnings? Student response:
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Ch 10a - Question 1(1 point You were hired as a consultant...

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