|The cost of common stock equity may be estimated by using the ________.
||c. Gordon model
|When discussing weighing schemes for calculating the weighted average cost of capital, ________.
||d. market value weights are preferred over book value weights and target weights are preferred over historical weights
|The cost of capital reflects the cost of funds ________.
||b. over a long-run time period
|The ________ is the rate of return required by the market suppliers of capital in order to attract their funds to the firm.
||a. cost of capital
|The four basic sources of long-term funds in the pecking order for a firm are ________.
||c. retained earnings, long-term debt, preferred stock, and common stock
|The ________ is the firm’s desired optimal mix of debt and equity financing.
||c. target capital structure
|The cost of new common stock financing is higher than the cost of retained earnings due to ________.
||b. flotation costs and underpricing
|Which of the following is true of long-term funds?
||a. They are the sources that supply the financing necessary to support a firm’s capital budgeting activities
|The cost of retained earnings is ________.
||d. equal to the cost of common stock equity
|Debt is generally the least expensive source of capital. This is primarily due to ________.
||b. the tax deductibility of interest payments