They include expenses like investment banker fees and commissions. They include

Question

      They include expenses like investment banker fees and commissions.
      They include the underwriting spread.
      They tend to raise the cost of capital.
      all of the above

2. Which of the following statements regarding the cost of equity is true? (Points : 1)

It can be estimated in three different ways.
      It is always estimated using the present value of future dividends approach.
      It is estimated by solving for the discount rate for a perpetuity.
      It is generally lower than the cost of debt because equity holders are paid after taxes are paid.

3. Chapter 9 discusses three different types of returns. Identify the item in the list below that is NOT one of those three types of returns. (Points : 1)

the actual rate of return
      the expected rate of return
      the risk-free rate of return
      the required rate of return

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

1. Which of the following is true of flotation costs? (Points : 1)

Explanation / Answer

They include expenses like investment banker fees and commissions.
They include the underwriting spread.
They tend to raise the cost of capital.
all of the above

2. Which of the following statements regarding the cost of equity is true? (Points : 1)

It can be estimated in three different ways.
It is always estimated using the present value of future dividends approach.
It is estimated by solving for the discount rate for a perpetuity.
It is generally lower than the cost of debt because equity holders are paid after taxes are paid.

3. Chapter 9 discusses three different types of returns. Identify the item in the list below that is NOT one of those three types of returns. (Points : 1)

the actual rate of return
the expected rate of return
the risk-free rate of return
the required rate of return

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

1. Which of the following is true of flotation costs? (Points : 1)

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