Selling new stock is greater than cost of retained earnings

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Reference no: EM131902474

The capital structure that should be used to plan for next years capital program is the:

a. book value based capital structure

b. market value based capital structure

c. either the book value or the market value capital structure is satisfactory

d. neither the book value or the market value capital structure is satisfactory

The cost of equity from selling new stock is greater than the cost of retained earnings because

a. selling new stock decreases the earnings per share.

b. selling new stock increases the market price of the stock.

c. of the flotation costs.

d. dividends are increased.

If a firm will use only equity funds next year, the ____ is the correct discount rate to use in the capital budgeting models (NPV, etc.)

a. component cost of equity

b. weighted average cost of capital

c. historical cost of funds

d. all of the above are correct

Reference no: EM131902474

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