Reference no: EM132753059

Questions -

Q1. Wood planned to issue 100 par value of 6% preferred stock. A similar stock sells for 120. Wood must pay flotation cost of 5%. What is the cost of preferred stock?

a. none of these

b. 5.12%

c. 5.26%

d. 5%

Q2. If a company's desired long-run proportion of funds to be provided consist of 60% common stock and retained earnings with an after-tax of 15% and 40% bonds with an after-tax cost of 8%, its weighted-average cost of capital will be:

a.13.7%

b. 12.2%

c. 15%

d. 10.8%

Q3. The company eps is 12 and earnings available to the common shareholder is 6,000,000. The Par value of a common stock is 100 and it is selling at 108 in the market, net of 10% flotation cost. The tax rate is 20%. What is the cost of common stock?

a. 8.89%

b. none of these

c. 10%

d. 12%

Q4. Mike borrows 2,000,000 from a bank of 15% interest per annum. If the tax rate is 30% and his net income for the year using the 2,000,000 debt was 350,000, how much is the cost of the debt?

a. 10.50%

b. 4.50%

c. none of these

d. 15%

Q5. The weighted average of cost of capital represents the:

a. equivalent units of capital used by the organization

b. overall cost of dividends plus interest paid by the organization

c. overall cost of capital from all organization financing sources

d. cost of bonds, preferred stock and common stock divided by 3 sources