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NEW QUESTION: 1
Your company's stock sells for $50 per share, its last dividend was $2.00, its growth rate is a constant 5 percent, and the company would incur a flotation cost of 15 percent if it sold new common stock. Net income for the coming year is expected to be $500,000, the firm's payout ratio is 60 percent, and its common equity ratio is 30 percent. If the firm has a capital budget of $1,000,000, what component cost of common equity will be built into the WACC for the last dollar of capital the company raises?
A. 11.75%
B. 12.30%
C. 9.94%
D. 9.20%
E. 10.50%
Answer: C
Explanation:
Explanation/Reference:
Explanation:
BP(RE) = RE/Equity fraction = $500,000(0.4)/0.3 = $666,667. BP
= break point; RE = retained earnings
Since the capital budget will be $1 million, and since all equity in the WACC beyond $666,667 will be external equity, the WACC of the last dollar raised will include equity at a cost of k(e):
k(e) = $2(1.05)/$50(1 - 0.15) + .05 = 9.94%.

NEW QUESTION: 2

A. Clark-Wilson
B. Biba
C. Graham-Denning
D. Beil-LaPadula
Answer: A

NEW QUESTION: 3
In the development of the Internet, there are many milestone events. The order of the milestone events in the following options is normal.
A. The birth of ARPANET-the establishment of TCP / IP protocol specifications-the birth of DNS-www is officially open to the public
B. www is officially open to the public-the birth of DNS-the establishment of TCP / IP protocol specifications-the birth of ARPANET
C. The birth of DNS-the establishment of TCP / IP protocol specifications-the birth of ARPANET-www is officially open to the public
D. The establishment of TCP / IP protocol specifications-ARPANET is born-www is officially open to the public-DNS is born
Answer: A