A Firm Has Determined Its Optimal Capital Structure Which Is

question 11

Multiple Choice

A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions.
$$\begin{array} { l c } \text { Source of capital } & \begin{array} { c } \text { Target market } \\\text { proportions }\end{array} \\\text { Long-term debt } & 20 \% \\\text { Preferred stock } & 10 \\\text { Common stock equity } & 70\end{array}$$
DEBT: The firm can sell a 12-year, $1,000 par value, 7 percent bond for $960. A flotation cost of 2 percent of the face value would be required in addition to the discount of $40.
PREFERRED STOCK: The firm has determined it can issue preferred stock at $75 per share par value. The stock will pay a
$10 annual dividend. The cost of issuing and selling the stock is $3 per share.
COMMON STOCK: A firm's common stock is currently selling for $18 per share. The dividend expected to be paid at the
end of the coming year is $1.74. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $1.50. It is expected that to sell, a new common stock issue must be underpriced $1 per share in
floatation costs. Additionally, the firm's marginal tax rate is 40 percent.

-The firm's aftertax cost of debt is

• A) 8.13 percent.
• B) 4.5 percent.
• C) 8 percent.
• D) 3.25 percent.

Learn about the principles of operant conditioning including reinforcement schedules and their effects on behavior.

Understand the principles of classical conditioning and how it differs from operant conditioning.

Recognize the role of antecedents and consequences in shaping behavior.

Understand the differences between positive and negative reinforcement, and positive and negative punishment.

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Definitions:

Existing Constructs

Pre-established concepts or frameworks used to understand or interpret various phenomena.

Anticipating Events

The process of predicting or expecting future occurrences based on current or past information.

Role Construct Repertory

A psychological test and theory that assesses how individuals construe significant people in their lives, reflecting their personal construct systems.

Schizophrenics

Individuals diagnosed with a mental disorder that involves a range of symptoms, including delusions, hallucinations, disorganized speech, and impaired cognitive functioning.