Other Things Equal, a Firm That Must Obtain Its Long-Term

question 72

Multiple Choice

Other things equal, a firm that must obtain its long-term debt and equity in a highly illiquid domestic securities market will probably have a:

• A) relatively low cost of capital.
• B) relatively high cost of capital.
• C) relatively average cost of capital.
• D) cost of capital that we cannot estimate from this question.

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Definitions:

Date Of Payment

The specific day on which a payment is due to be made or actually made.

Dividends

Payments made by a corporation to its shareholders, usually as a distribution of profits.

Stockholders

Individuals or entities that own shares in a corporation, granting them ownership interests and possibly voting rights in the company.

Issue Price Over Par

A scenario where the sale price of a security is higher than its nominal or face value at the time of issuance.