The Higher the Firm's Flotation Cost for New Common Equity,the

question 83

True/False

The higher the firm's flotation cost for new common equity,the more likely the firm is to use preferred stock,which has no flotation cost,and retained earnings,whose cost is the average return on the assets that are acquired.

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Definitions:

MRS

Marginal Rate of Substitution, the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility.

Budget Line

A graphical representation of all possible combinations of two goods that a consumer can purchase with a given budget at fixed prices.

Expected Percentage Return

The predicted return on an investment, expressed as a percentage of the initial investment.

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values from the mean of the dataset.