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5 Written questions

4 Matching questions

  1. rd
  2. capital component
  3. wacc
  4. RPm
  1. a interest rate on the firm's new debt. before-tax component cost of debt
  2. b WdRd(1-T) + WpRp + WcRs
  3. c one of the types of capital used by firms to raise funds. They are investor-supplied items including debt, preferred stock, and common equity
  4. d rm - rRF

5 Multiple choice questions

  1. rs + (flotation adjustment)
  2. re = D1/[P(1-F)] + g
  3. rs = rRF + (RPm)b
  4. the amount that must be added to rs to account for flotation costs to find re
  5. the mix of debt, preferred stock and common equity the firm plans to raise to fund its future projects

5 True/False questions

  1. flotation adjustmentthe amount that must be added to rs to account for flotation costs to find re

          

  2. market value of equityrs + (flotation adjustment)

          

  3. cost of retained earningsrs + (flotation adjustment)

          

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

          

  5. rd(1-T)interest rate on the firm's new debt. before-tax component cost of debt