All of the Following Methods Can Be Used to Estimate

question 7

Multiple Choice

All of the following methods can be used to estimate the cost of equity except:

• A)Unlike debt and preferred stock,cash flows from common equity are not fixed or known beforehand and their risk is harder to evaluate.
• B)Firms have two sources of common equity,retained earnings and new stock issues,and thus two costs of common equity.
• C)From the shareholders' perspective,the opportunity cost of retained earnings is the return the shareholders could earn by investing the funds in assets whose risk is similar to that of the firm.
• D)If the firm cannot invest its retained earnings to achieve a sufficient risk-adjusted return,shareholders would be better off receiving 100 percent of its net income as dividends.
• E)All of the above statements are correct.

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Definitions:

Atrioventricular

Pertaining to the atria and ventricles of the heart, or the connection or coordination between them.

Mitral Stenosis

A narrowing of the mitral valve opening in the heart, restricting blood flow from the left atrium to the left ventricle.

BP

Blood Pressure, the pressure of circulating blood against the walls of blood vessels, often measured as an indicator of heart health.

HDL

stands for High-Density Lipoprotein, often called "good" cholesterol, which helps remove other forms of cholesterol from your bloodstream.