According to the Bond-Yield-Plus-Risk-Premium Approach, a Firm's Cost of Retained

question 11

Multiple Choice

According to the bond-yield-plus-risk-premium approach, a firm's cost of retained earnings, r_s, can be estimated by adding a risk premium of 3 to 5 percentage points to:

• A)its cost of preferred stock, r_ps.
• B)the risk free rate of return.
• C)its before-tax interest cost of debt, r_s.
• D)its return on equity (ROE).
• E)its after-tax interest cost of debt, r_sT.

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