A Firm Has Determined Its Optimal Capital Structure Which Is

question 16

Multiple Choice

A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions.
$$\begin{array} { l c } \text { Source of capital } & \begin{array} { c } \text { Target market } \\\text { proportions }\end{array} \\\hline \text { Long-term debt } & 20 \% \\\text { Preferred stock } & 10 \\\text { Common stock equity } & 70\end{array}$$ 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 cost of a new issue of common stock is

• A) 14.4 percent.
• B) 7 percent.
• C) 9.08 percent.
• D) 13.2 percent.

Apply ratio analysis to assess a company's profitability, efficiency, liquidity, and solvency.

Understand the basic components that define different communication styles.

Identify and describe various communication styles, including directive, supportive, emotive, and reflective styles.

Recognize the influence of personal and others' communication styles on interpersonal relations and leadership effectiveness.

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Definitions:

Low Validity

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Psychological assessments where individuals respond to ambiguous stimuli, revealing hidden emotions, desires, and struggles.

Overbearing Supervisor

A manager or supervisor who is excessively controlling or domineering, often to the discomfort or detriment of their subordinates.

Displacement

The act of moving something from its place or position, often used in physics to describe the change in position of an object.