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Which of the following statements about the cost of capital is INCORRECT?
a. A company's target capital structure affects its weighted average cost of capital.
b. Weighted average cost of capital calculations should be based on the after-tax-costs of all the individual capital components.
c. If a company's tax rate increases, then, all else equal, its weighted average cost of capital will increase.
d. Flotation costs can increase the cost of preferred stock.
Draw a time line to show the cash flows of the project and compute the project's payback period, net present value, profitability index, and internal rate of return.
The NPV of the cash flow in question 6.15 is a)438.32 MM at 15% and b) -28.16 MM at 20 %. What is the rate of return of this cash flow?
Different places as it moves from office to living room and into our pockets and where is this all headed.
The lease is noncancelable with no renewal option. The lease term is 10 years (the same as the estimated economic life).
A firm's cost of capital will generally increase if the firm lowers its debt-equity ratio. The cost of equity will generally increase for risky firms when the risk-free rate of return increases. An increase in which one of the following is most apt t..
KIC, Inc., plans to issue $5 million of bonds with a coupon rate of 8 percent and 30 years to maturity. The current market interest rates on these bonds are 7 percent. If the bonds are noncallable, what is the price of the bonds today? If the bonds a..
Farris Industrial purchased a machine five years ago at a cost of $164,900. The machine is being depreciated using the straight-line method over eight years. The tax rate is 35 percent and the discount rate is 14 percent. If the machine is sold today..
You pay 1000 per acre for a tract of land and your opportunity cost is 7 percent. You hold the land 8 years and pay 100 in taxes each year. What price per acre must you sell the land for to break even with your opportunity cost rate?
Lohn Corporation is expected to pay the following dividends over the next four years: $18, $14, $13, and $7.50. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends forever. If the required return on the stock is 1..
Slow n' steady Inc, has a stock price of $30, will pay a dividend next year of $3, and has expected dividend growth of 1% per year. what is your estimate of slow n steady's cost of equity capital?
What would an investor pay for a stock, if his required rate of return is 12%, the stock next year’s dividend is $3/share, and the dividend is expected to grow at 4%?
The Estrada Company uses cost-plus pricing with a 0.32 markup. The company is currently selling 100,000 units. Each unit has a variable cost of $3.80. In addition, the company incurs $184,400 in fixed costs annually. If demand falls to $76,000 units ..
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