Calculation of the Weighted Average Cost of Capital Requires All

question 366

Multiple Choice

Calculation of the weighted average cost of capital requires all of the following EXCEPT:

• A) The total market value of a firm's debt via the number of bonds outstanding and the current par value per bond.
• B) The market value of bonds outstanding relative to the total market value of the firm.
• C) The corporate tax rate.
• D) The current market value of a firm's equity via the total number of shares and the stock price.
• E) The market value of equity outstanding relative to the total market value of the firm.

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Definitions:

Additional Paid-in Capital

The amount of money that shareholders have paid in excess of the par value of the shares; this can occur when shares are initially sold or during subsequent capital injections.

Preferred Stock

A class of ownership in a corporation that typically provides dividend payments before dividends are issued to common stockholders, often with no voting rights.

Common Stock

A type of security that signifies ownership within a corporation, known as corporate equity ownership.

Cumulative Feature

A characteristic of preferred stock that entitles shareholders to receive dividends that were omitted in the past before any dividends can be issued to common stockholders.