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5 Written questions

5 Matching questions

  1. wacc
  2. flotation cost
  3. cost of new common stock
  4. RPm
  5. capm equation
  1. a the percentage cost of issuing new common stock. F
  2. b re = D1/[P(1-F)] + g
  3. c rm - rRF
  4. d WdRd(1-T) + WpRp + WcRs
  5. e rs = rRF + (RPm)b

5 Multiple choice questions

  1. the amount that must be added to rs to account for flotation costs to find re
  2. ? = D1/P0 + g
  3. the number of shares of stock outstanding multiplied by the current stock price
  4. a weighted average of the component costs of debt, preferred stock, and common equity
  5. target weights of debt, preferred stock, and common equity. The weights are percentages of the different types of capital the firm plans to use when it raises capital in the future

5 True/False questions

  1. target capital structurethe number of shares of stock outstanding multiplied by the current stock price

          

  2. cost of new common stockThe cost of external equity; based on the cost of retained earnings, but increased for flotation costs. Re

          

  3. rd(1-T)after-tax component cost of debt

          

  4. rdinterest rate on the firm's new debt. before-tax component cost of debt

          

  5. cost of external equity? = D1/P0 + g