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The weighted average cost of capital for a firm is...

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The weighted average cost of capital for a firm is the: A. Discount rate which the firm should apply to all of the projects it undertakes. B. Rate of return a firm must earn on its existing assets to maintain the current value of its stock. C. Coupon rate the firm should expect to pay on its next bond issue. D. Minimum discount rate the firm should require on any new project. E. Rate of return shareholders should expect to earn on their investment in this firm. The capital structure weights used in computing the weighted average cost of capital: A. Are based on the book values of total debt and total equity. B. Are based on the market value of the firm's debt and equity securities. C. Are computed using the book value of the long-term debt and the book value of equity. D. Remain constant over time unless the firm issues new securities. E. Are restricted to the firm's debt and common stock. Chelsea Fashions is expected to pay an annual dividend of $1.30 a share next year. The market price of the stock is $24.00 and the growth rate is 3 percent. What is the firm's cost of equity (retained earnings)? A. 8.24 percent B. 8.30 percent C. 8.42 percent D. 8.47 percent E. 8.11 percent

 

Paper#5754 | Written in 18-Jul-2015

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