Micro Brew (MB)is Considering Issuing New Common Stock

question 61

Multiple Choice

Micro Brew (MB) is considering issuing new common stock.MB currently trades at $32.50 a share and MB's investment bankers estimate that it will cost $2.30 a share to issue new common stock.What is MB's estimated cost of new common shares,if the firm's cost of retained earnings is 12.01%?

• A) 8.50%
• B) 12.25%
• C) 13.02%
• D) 15.00%

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Definitions:

Desired Money Holding

The preference of individuals or firms for holding cash or liquid assets based on expected financial needs or uncertainties.

Aggregate Demand

The full extent of demand for all goods and services within an economy, measured against a specified price level across a given temporal span.

Employment Act of 1946

A United States federal law aiming to promote maximum employment, production, and purchasing power through economic stability policies.

Aggregate Demand

The total demand for final goods and services in an economy at a given time.