Podcast
Questions and Answers
What does the term 'cost of capital' refer to?
What does the term 'cost of capital' refer to?
- The total expenses incurred by the firm
- An additional financial burden on the firm
- A weighted average cost of financing sources (correct)
- The amount of capital raised by the firm
Which of the following is NOT a method a firm can use to raise capital?
Which of the following is NOT a method a firm can use to raise capital?
- Mutual Funds (correct)
- Preferred Stock
- Common Stock
- Bonds
What does the cost of capital represent for financial managers?
What does the cost of capital represent for financial managers?
- An increase in profits
- A benefit of investing
- A cost of raising funds (correct)
- A decrease in operational costs
How is the cost of debt for an issuing firm calculated?
How is the cost of debt for an issuing firm calculated?
In the context of financing, what does EBIT stand for?
In the context of financing, what does EBIT stand for?
What is calculated in order to evaluate new investment opportunities?
What is calculated in order to evaluate new investment opportunities?
How does the tax rate affect the after-tax cost of debt?
How does the tax rate affect the after-tax cost of debt?
What is one of the objectives related to the concept of cost of capital?
What is one of the objectives related to the concept of cost of capital?
What does a firm pay to stockholders that affects retained earnings?
What does a firm pay to stockholders that affects retained earnings?
In the example given, why will the bond sell for par despite paying the market rate?
In the example given, why will the bond sell for par despite paying the market rate?
Which type of cost is NOT included in the calculation of WACC?
Which type of cost is NOT included in the calculation of WACC?
How do investors view the rate of return on a security?
How do investors view the rate of return on a security?
What is the pre-tax cost of debt for the firm?
What is the pre-tax cost of debt for the firm?
How is the after-tax cost of debt calculated for the firm?
How is the after-tax cost of debt calculated for the firm?
What is the formula to calculate the cost of preferred stock?
What is the formula to calculate the cost of preferred stock?
If a company issues preferred stock with a $10 dividend and $80 price (after flotation costs), what would be the cost of preferred stock?
If a company issues preferred stock with a $10 dividend and $80 price (after flotation costs), what would be the cost of preferred stock?
How can companies raise common equity according to the text?
How can companies raise common equity according to the text?
What is the cost of common equity for a company that retains earnings after paying common dividends?
What is the cost of common equity for a company that retains earnings after paying common dividends?
What are the two sources of common equity mentioned in the text?
What are the two sources of common equity mentioned in the text?
Which method is used to estimate the cost of internal equity according to the text?
Which method is used to estimate the cost of internal equity according to the text?
Which model provides a basis for evaluating investor's required rates of return on common equity?
Which model provides a basis for evaluating investor's required rates of return on common equity?
What does CAPM stand for in the context of the text?
What does CAPM stand for in the context of the text?
Which variable does the Capital Asset Pricing Model (CAPM) depend on?
Which variable does the Capital Asset Pricing Model (CAPM) depend on?
What does the Dividend Growth Model equation D1 kc = Po + g represent?
What does the Dividend Growth Model equation D1 kc = Po + g represent?
What is the market risk premium in this scenario?
What is the market risk premium in this scenario?
What is the beta coefficient of G-Mart’s common stock?
What is the beta coefficient of G-Mart’s common stock?
If a new issue is offered, what are the floatation costs as a ratio to the stock price?
If a new issue is offered, what are the floatation costs as a ratio to the stock price?
What is G-Mart’s cost of internal common stock?
What is G-Mart’s cost of internal common stock?
What is the cost of external common stock for G-Mart?
What is the cost of external common stock for G-Mart?
What is the expected growth rate for Dian Co.'s dividend?
What is the expected growth rate for Dian Co.'s dividend?
