Litigation risk or losing a major customer

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Reference no: EM131300282

1. You were recently hired by Nast Media Inc. to estimate its cost of capital. You were provided with the following data: D1 = $2.00; P0 = $55.00; g = 8.00% (constant); and F = 5.00%. What is the cost of equity raised by selling new common stock?

11.24%

11.83%

13.04%

12.42%

2. Which of the following motives for holding cash concerns managers’ ability to weather shocks to operating cash flows (i.e., litigation risk or losing a major customer)?

Transaction motive

Precautionary motive

Speculative motive

Agency motive.

Reference no: EM131300282

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