A Firm Has a Cost of Equity of 10 Per

question 41

Multiple Choice

A firm has a cost of equity of 10 per cent,a cost of preferred of 9 per cent,and an after tax cost of debt of 5 per cent.Given this,which one of the following will decrease the firm's cost of capital?

• A)exercising the call option on the debt
• B)decreasing the firm-specific risk associated with the firm
• C)issuing new debt to offset an increase in the dividend payout ratio
• D)increasing the systematic risk of the firm
• E)decreasing the debt-equity ratio

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Definitions:

Standard Deviations

A metric that calculates the extent of spread or variability of data points from the average value.

Bell Shaped Distribution

A probability distribution that is symmetric and unimodal, with the shape of a bell, often associated with the normal distribution.

Coefficient of Variation

A measure of relative variability that describes the standard deviation as a percentage of the mean.

Standard Deviation

A measure of the dispersion or variability within a set of numerical data, indicating how spread out the numbers are from the average.