The after-tax cost of preferred stock capital is: Group of answer choices Always equal to the after-tax cost of debt capital. Always higher than the cost of common equity. Always equal to the before-tax cost of preferred stock capital. Always smaller than the before-tax cost of preferred stock capital.

The after-tax cost of preferred stock capital is: Group of answer choices Always equal to the after-tax cost of debt capital. Always higher than the cost of common equity. Always equal to the before-tax cost of preferred stock capital. Always smaller than the before-tax cost of preferred stock capital.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 1Q: Define each of the following terms: Weighted average cost of capital, WACC; after-tax cost of debt,...

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Define each of the following terms: Weighted average cost of capital, WACC; after-tax cost of debt, rd(1 – T); after-tax cost of short-term debt, rstd(1 – T) Cost of preferred stock, rps; cost of common equity (or cost of common stock), rs Target capital structure Flotation cost, F; cost of new external common equity, re
23 Refer to the following statements:I. the best capital structure is one that maximizes the intrinsic value / market price of the stock.II. the best capital structure is one that maximizes the weighted average cost of capital.III. the best capital structure is one that maximizes the earnings per share of stock.IV. the best capital structure is one that minimizes the weighted average cost of capital.Which of the following is(are) correct? Group of answer choices I and III only II and III only I, II and III only I only I, III and IV only II only I and IV only
Too Young, Inc., has a bond outstanding with a coupon rate of 6.8 percent and semiannual payments. The bond currently sells for $949 and matures in 25 years. The par value is $1,000. What is the company's pretax cost of debt? Multiple Choice 760% 785% O 739% 3.59% Multiple Choice O O 7.60% 7.85% 3.59% 7.39% 7.24%
which one is correct please confirm? QUESTION 7 The cost of equity capital for non-dividend paying stocks can be determined by ____. I. using the Capital Asset Pricing Model II. estimating ke for comparable dividend-paying stocks in their industry a. Only statement I is correct. b. Only statement II is correct. c. Both statements I and II are correct. d. Neither statement I nor II is correct.
which one is correct please confirm? The cost of equity capital for non-dividend paying stocks can be determined by ____. I. using the Capital Asset Pricing Model II. estimating ke for comparable dividend-paying stocks in their industry a. Only statement I is correct. b. Only statement II is correct. c. Both statements I and II are correct. d. Neither statement I nor II is correct.
To eliminate all risk (including credit risk) an American company with a contract to sell goods to a foreign country can hedge by purchase a forward rate contract. O No answer text provided. O True O No answer text provided. O False
3) Consider a firm with capital from debt, preferred stock, and common equity in its capital structure. You are given that ra (1-T) = after-tax cost of debt, r, = cost of internal equity, and WACC = weighted average cost of capital. Which of the following statements is correct? (">" represents "greater than") A) r. > WACC > ra (1-T). B) ra (1-T) > rs > WACC. C) r. > ra (1-T) > WACC. D) WACC > rs > ra (1-T). WACK
Which of the following statements is CORRECT? Select one: a. The capital structure that maximizes the stock price is also the capital structure that minimizes the weighted average cost of capital (WACC). b. The capital structure that maximizes the stock price is also the capital structure that maximizes earnings per share. c. The capital structure that maximizes the stock price is also the capital structure that maximizes the firm’s times interest earned (TIE) ratio. d. Increasing a company’s debt ratio will typically reduce the marginal costs of both debt and equity financing; however, this still may raise the company’s WACC. e. If Congress were to pass legislation that increases the personal tax rate but decreases the corporate tax rate, this would encourage companies to increase their debt ratios.
Which one of the following statements related to capital gains is correct? Multiple Choice O O O O The capital gains yield includes only realized capital gains. An increase in an unrealized capital gain will increase the capital gains yield. The capital gains yield must be either positive or zero. The capital gains yield is expressed as a percentage of a security's total return. The capital gains yield represents the total return earned by an investor.
If a firm has preferred stock, the after-tax weighted average cost of capital (WACC) equals: Multiple Choice A) rD (D/V) + (1 − TC)[rP (P/V) + rE (E/V)]; (where V = D + P + E). B) rD (D/V) + rP (P/V) + rE (E/V); (where V = D + P + E). C) (1 − TC)[rD (D/V) + rP (P/V) + rE (E/V)]; (where V = D + P + E). D) rD (1 − TC)(D/V) + rP (P/V) + rE (E/V); (where V = D + P + E).
6. What is the Cost of Equity for CS3? 7. The weighted average cost of capital for CS1 is 8. The weighted average cost of capital for CS3 is 9. What is the weight of equity in the optimal capital structure 10. What is the weighted average cost of capital on the optimal capital structure?
The weighted average cost of capital provides the rate of return such that All capital providers would be paid at least a fair rate of return Only the bondholders would be paid at least fair rate of return All capital consumers would be provided a fair rate of return Only the shareholders would be paid at least a fair rate of return