# The weighted average of the firms costs of equity

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Chapter 5 / Exercise 44
Finite Mathematics for the Managerial, Life, and Social Sciences: An Applied Approach
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30.The weighted average of the firm’s costs of equity, preferred stock, and aftertax debt is the:a.reward to risk ratio for the firm.b.expected capital gains yield for the stock.c.expected capital gains yield for the firm.d.portfolio beta for the firm.e.weighted average cost of capital (WACC).
31.The costs incurred by the firm when new issues of stocks or bonds are sold are called:
f.32.The cost of equity for a firm is:
33.The pre-tax cost of debt for a firm:
34.The capital structure weights used in computing the weighted average cost of capital are:a.constant over time provided that the debt-equity ratio changes in unison with the market values.b.based on the face value of the firm’s debt.c.computed using the book value of the long-term debt and the shareholder’s equity.d.based on the market value of the firm’s debt and equity securities.
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Chapter 5 / Exercise 44
Finite Mathematics for the Managerial, Life, and Social Sciences: An Applied Approach
Tan Expert Verified
e.limited to the firm’s debt and common stock.
35.Ben’s Ice Cream just paid (D0) their annual dividend of \$.75 a share. The stock has a market price of \$32 (P1) and a beta of .90. The return on the U.S. Treasury bill (risk free) is 4 percent and the market has a 12 percent rate of return. What is the cost of equity?
36.The Bet-r-Bilt Company has a six-year (n) bond outstanding with a 5 percent coupon(pmt). Interest payments arepaid semi-annually (x2) .The face amount of the bond is \$1,000. This bond is currently selling for 98 percent (pv)of its face value (future value). What is the company’s pre-tax cost of debt (interest)?
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