Finance Exam 3

rd Before-Tax Cost of Debt
rp Cost of Preferred Stock
rs Cost of Common Equity Raised by Retaining Earnings
re Cost of Common Equity Raised by Issuing New Stock
What does Preferred Stock and Debt have in common? Usually has no voting rights
What does Preferred Stock and Equity have in common? Usually has no specific maturity date
The cost of raising capital through retained earnings is _________ the cost of raising capital through new common stock. Less Than
What factors cannot be controlled involving WACC Cost of Capital? The performance of index funds and interest rates in the economy
If Expected Return is HIGHER than WACC (risk based cost), a firm should… Accept the Project

Leave a Reply

Your email address will not be published. Required fields are marked *