All Else Constant,which One of the Following Will Increase a Firm's

question 44

Multiple Choice

All else constant,which one of the following will increase a firm's cost of equity if the firm computes that cost using the security market line approach? Assume the firm currently pays an annual dividend of $1 a share and has a beta of 1.2.

• A)a reduction in the dividend amount
• B)an increase in the dividend amount
• C)a reduction in the market rate of return
• D)a reduction in the firm's beta
• E)a reduction in the risk-free rate

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Definitions:

Price Increase

A rise in the cost of goods or services over a period of time, often affecting the purchasing power.

Cheese

A dairy product derived from milk that is produced in a wide range of flavors, textures, and forms by coagulating the milk protein casein.

Substitutes

Products or services that can replace each other in use, causing the demand for one to increase when the price of the other rises.

Complements

Goods or services that are used together with another, such that the demand for one increases when the price of the other decreases.