Table 9.1 A Firm Has Determined Its Optimal Capital Structure Which Is

question 118

Multiple Choice

Table 9.1
A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Debt: The firm can sell a 12-year, $1,000 par value, 7 percent bond for $960. A flotation cost of
2 percent of the face value would be required in addition to the discount of $40.
Preferred Stock: The firm has determined it can issue preferred stock at $75 per share par value. The stock will pay a $10 annual dividend. The cost of issuing and selling the stock is $3 per share.
Common Stock: A firm's common stock is currently selling for $18 per share. The dividend expected to be paid at the end of the coming year is $1.74. Its dividend payments have been growing at a constant rate for the last four years. Four years ago, the dividend was $1.50. It is expected that to sell, a new common stock issue must be underpriced $1 per share in floatation costs. Additionally, the firm's marginal tax rate is 40 percent.
-The firm's cost of retained earnings is ________. (See Table 9.1)

• A) 10.2 percent
• B) 13.9 percent
• C) 12.4 percent
• D) 13.6 percent

Compare economic stability and growth periods in U.S. history.

Distinguish historical misconceptions from facts regarding the causes and effects leading to the Civil War.

Describe the evolution and current state of the U.S. economy in relation to global powers.

Relate historical agricultural and industrial policies to contemporary economic structures and conditions.

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Definitions:

Touch

Touch is one of the five senses, involving the sensation that occurs when an object comes into contact with the skin.

Hearing

The faculty of perceiving sounds, which is an essential part of communication and environmental awareness.

Neur/o

A prefix relating to nerves or the nervous system.

Combining Form

A word element used to link parts of words together in medical terminology.