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40.Although it is a subjective measure, analysts often estimate the cost of common equity by adding a risk premium of 3 to 5 percentage points to the a. the cost of preferred stock for the firm. b. the risk free rate. c. interest rate on the firm's long term debt. d. the market return. e. the growth rate of the firm. 41.The target capital structure of a firm is the capital structure that 42.The marginal cost of capital __________ as more capital is raised during a given period. 43.A graph of a firm's acceptable capital projects ranked in the order of the projects' internal rate of return is called the firm's ______________. 44.Which of the following maybe true concerning debt and equity? a. The cost of debt for Firm A is greater than the cost of equity for Firm A. b. The cost of debt for Firm A is greater than the cost of equity for Firm B. c. The cost of internally generated equity for Firm A is greater than the cost of externally generated equity funds for Firm A. d. The cost of internally generated equity for Firm A is less than the cost of debt for Firm A. e. None of the above could be true.
Chapter 8DThe Cost of Capital 242 45.Which of the following statements is correct?