FUNDAMENTALS OF CORP.FIN.(LL)-W/CONNECT
10th Edition
ISBN: 9781260848670
Author: BREALEY
Publisher: MCG
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Question
Chapter 7, Problem 1QP
a.
Summary Introduction
To discuss: Whether the given statement is classified under true of false.
a.
Expert Solution
Answer to Problem 1QP
The given statement is classified as“False”.
Explanation of Solution
The reasons supporting the statement to be false is as follows:
Generally, the bid price is consistently lower comparative with the ask price, which results in the bid-ask spread.
Therefore, the given statement is classified as “False”.
b.
Summary Introduction
To discuss: Whether the given statement is classified under true of false.
b.
Expert Solution
Answer to Problem 1QP
The given statement is classified as “False”.
Explanation of Solution
The reasons supporting the statement to be false is as follows:
The investor who want to sell quickly at the best accessible price would enter a market order.
Therefore, the given statement is classified as “False”.
c.
Summary Introduction
To discuss: Whether the given statement is classified under true of false.
c.
Expert Solution
Answer to Problem 1QP
The given statement is classified as “False”.
Explanation of Solution
The reasons supporting the statement to be false is as follows:
Sales by and between investors happen in the secondary market. Primary offerings are said to arise in the primary market and are sold by the company which issues it.
Therefore, the given statement is classified as “False”.
d.
Summary Introduction
To discuss: Whether the given statement is classified under true of false.
d.
Expert Solution
Answer to Problem 1QP
The given statement is classified as “False”.
Explanation of Solution
The reasons supporting the statement to be false is as follows:
ECNs are computer related systems that organizes and links different merchants with one another.
Therefore, the given statement is classified as “False”.
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Students have asked these similar questions
Moose Enterprises finds it is necessary to determine its marginal cost of capital. Moose’s current capital structure calls for 50 percent debt, 30 percent preferred stock, and 20 percent common equity. Initially, common equity will be in the form of retained earnings (Ke) and then new common stock (Kn). The costs of the various sources of financing are as follows: debt, 9.6 percent; preferred stock, 9 percent; retained earnings, 10 percent; and new common stock, 11.2 percent. a. What is the initial weighted average cost of capital? (Include debt, preferred stock, and common equity in the form of retained earnings, Ke.) b. If the firm has $18 million in retained earnings, at what size capital structure will the firm run out of retained earnings? c. What will the marginal cost of capital be immediately after that point? (Equity will remain at 20 percent of the capital structure, but will all be in the form of new common stock, Kn.) d. The 9.6 percent cost of debt referred to earlier…
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Need use the Kd (cost of debt) = Y(1 - T), Kp (Cost of preferred stock) = Dp/Pp - F, Ke = D1/P0 + g formulas or I will not understand.
Delta Corporation has the following capital structure: Cost Weighted (after-tax) Weights Cost Debt 8.1% 35% 2.84% Preferred stock (Kp) 9.6 5 .48 Common equity (Ke) (retained earnings) 10.1 60 6.06
Weighted average cost of capital (Ka) 9.38% a. If the firm has $18…
Chapter 7 Solutions
FUNDAMENTALS OF CORP.FIN.(LL)-W/CONNECT
Ch. 7 - Prob. 1QPCh. 7 - Prob. 2QPCh. 7 - Prob. 3QPCh. 7 - Prob. 4QPCh. 7 - Prob. 5QPCh. 7 - Prob. 8QPCh. 7 - Prob. 9QPCh. 7 - Prob. 10QPCh. 7 - Prob. 11QPCh. 7 - Prob. 12QP
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