. Which of the following statements is CORRECT?. Which of the following statements is CORRECT?. Which of the following statements is CORRECT? Assume that the firm is a

. Which of the following statements is CORRECT?

. Which of the following statements is CORRECT?

. Which of the following statements is CORRECT? Assume that the firm is a

publicly-owned corporation and is seeking to maximize shareholder wealth.

. Firm M's earnings and stock price tend to move up and down with other

firms in the S&P 500, while Firm W's earnings and stock price move

counter cyclically with M and other S&P companies. Both M and W

estimate their costs of equity using the CAPM, they have identical

market values, their standard deviations of returns are identical, and

they both finance only with common equity. Which of the following

statements is CORRECT?

. Bosio Inc.'s perpetual preferred stock sells for $97.50 per share, and

it pays an $8.50 annual dividend. If the company were to sell a new

preferred issue, it would incur a flotation cost of 4.00% of the price

paid by investors. What is the company's cost of preferred stock for

use in calculating the WACC?

. A company’s perpetual preferred stock currently sells for $92.50 per

share, and it pays an $8.00 annual dividend. If the company were to

sell a new preferred issue, it would incur a flotation cost of 5.00% of

the issue price. What is the firm's cost of preferred stock?

. O'Brien Inc. has the following data: rRF = 5.00%; RPM = 6.00%; and b =

1.05. What is the firm's cost of equity from retained earnings based on

the CAPM?

. Scanlon Inc.'s CFO hired you as a consultant to help her estimate the

cost of capital. You have been provided with the following data: rRF =

4.10%; RPM = 5.25%; and b = 1.30. Based on the CAPM approach, what is

the cost of equity from retained earnings?

. Assume that you are a consultant to Broske Inc., and you have been

provided with the following data: D1 = $0.67; P0 = $27.50; and g =

8.00% (constant). What is the cost of equity from retained earnings

based on the DCF approach?

. Teall Development Company hired you as a consultant to help them

estimate its cost of capital. You have been provided with the following

data: D1 = $1.45; P0 = $22.50; and g = 6.50% (constant). Based on the

DCF approach, what is the cost of equity from retained earnings?

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