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Home / Questions / 1.If a firm just paid a dividend equal to $4 00 a share then for the WACC in order to find...

1.If a firm just paid a dividend equal to $4 00 a share then for the WACC in order to find the cost of equity $4 should be divided by the current price of the stock and the quotient

1.If a firm just paid a dividend equal to $4.00 a share, then for the WACC, in order to find the cost of equity, $4 should be: (Points : 1)

divided by the current price of the stock, and the quotient should be added to the dividend growth rate.
divided by the current price of the stock.
multiplied by one minus the tax rate, and the difference divided by the current price of the stock.
multiplied by the sum of one plus the growth rate, and then divided by the current price of the stock; this quotient should be added to the dividend growth rate.

 

2.Which of the following statements regarding the cost of debt is true? (Points : 1)
The cost of debt for bonds equals the coupon rate of outstanding bonds.
The cost of debt for bonds is found by dividing the price by the annual coupon.
The cost of debt for bonds is found by calculating their yield to maturity.
The cost of debt equals the flotation costs charged by investment bankers who advise the firm.

 

3.The discount rate used in project evaluation should: (Points : 1)
be based on the firm s overall risk.
be based on each project s risk.
be estimated using the WACC for all projects.
All of the above are correct.

 

4.The financing mix reflected in the WACC should: (Points : 1)
reflect the desired mix and not necessarily the mix being used to finance a specific project.
vary from project to project, depending on how they are financed.
always reflect the firm s current capital structure.
None of these answers is correct.

May 01 2020 View more View Less

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