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Unformatted text preview: equity financing; however, it still may raise the companys WACC. A. True B. False 5. Although quite rare, the mathematics is such that the after-tax component cost of debt financing can be greater than the after-tax component cost of equity financing. A. True B. False 6. The cost to the firm of retained earnings is zero, since they are generated from the current earnings of the firm and there are no flotation costs associated with their retention. A. True B. False 7. If we assume that the stock market is efficient, and if we assume that Stock A has a beta of 1.20, while Stock B has a beta of 1.40 (that is, B has higher risk than A), then we must also assume that the required rate of return on Stock B exceeds the required rate of return on Stock A....
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08
- Cost Of Capital