5. (TCO 5) Which of the following is not true regarding the cost of retained ear

Question

5. (TCO 5) Which of the following is not true regarding the cost of retained earnings? (Points : 4) it is relevant to the WACC does not require new funds to be raised has associated flotation costs has a cost, which is the opportunity cost associated with stockholder funds 6. (TCO 4) A project has the following cash flows. What is the internal rate of return? Year 0 1 2 3 Cash flow -$195,600 $99,800 $87,600 $75,300 (Points : 4) less than 5% between 5 and 15% between 15 and 18% more than 21% 7. (TCO 5, 6 and 7) All else constant, the weighted average cost of capital for a firm will decrease if: (Points : 4) a firm's bonds start selling at a premium, rather than at a discount. the market risk premium increases. the firm replaces some of its debt with preferred stock. corporate taxes are eliminated. the dividend yield on the common stock increases.

Explanation / Answer

5.it is relevant to the WACC 6.between 5 and 15% 7.the firm replaces some of its debt with preferred stock.

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