The idea of determining the WACC is to identify the relevant cost of utilizing funds provided by different sources. TRUE OR FALSE. Flotation costs can be represented by the amount of costs a company pays to raise capital through authorizing sale of company ownership. TRUE OR FALSE Issuing new preferred shares should be the firm's last resort of raising new funds. TRUE OR FALSE

The idea of determining the WACC is to identify the relevant cost of utilizing funds provided by different sources. TRUE OR FALSE. Flotation costs can be represented by the amount of costs a company pays to raise capital through authorizing sale of company ownership. TRUE OR FALSE Issuing new preferred shares should be the firm's last resort of raising new funds. TRUE OR FALSE

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter1: Role Of Accounting In Society

Section: Chapter Questions

Problem 14MC: All of the following are sustainable methods businesses can use to raise capital (funding) except...

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All of the following are sustainable methods businesses can use to raise capital (funding) except for ________. A. borrowing from lenders B. selling ownership shares C. profitable operations D. tax refunds
Your corporation needs additional capital to fund an expansion. Discuss the advantages and disadvantages of raising capital through the issuance of stock. Would debt be a better option? Why or why not?
Suppose a firm makes the following policy changes listed. If a change means that external, nonspontaneous financial requirements (AFN) will increase, indicate this by a (+); indicate a decrease by a (−); and indicate no effect or an indeterminate effect by a (0). Think in terms of the immediate effect on funds requirements.
Companies that face large investments they cannot finance internally through the retention of earnings must go to the financial market to raise the needed funds. When they do this, they will incur what are commonly referred to as floatation costs. Discuss how these floatation costs should be incorporated into the firm’s analysis of net present value
The company wishes to mobilize short term funds through various sources, Which of the following is not an appropriate source for the company? Select one: A. Equity Shares B. Commercial Paper C. Treasury Bills D. Commercial Bills
Which of the following statement is correct Select one: A . The capital structure of a company may comprise of Equity Share Capital, Preference Share Capital and Debentutes B . Capital structure is a method of analyzing and comparing substantial future investments and expenditures to determine which ones are most worthwhile C . working capital referring to the mix of different sources of long - term funds D .Capital expenditure decisions do not involve commitment of large sums of money E .None of the statement is correct
If managers of a company have inside information about the company’s future performances and such inside information is unknown to outsiders, then the company’s managers are most likely to use _____ to finance its project investment Group of answer choices a. the company’s retained earnings b. debt borrowing from banks c. share issuance to new investors d. there is no difference among the above three funding options
As part of his duties, if a finance manager of a company is working on the appropriate source of finance and estimating cost of capital with appropriate debt-equity combination of the company for an expansion proposal, which of the following function he is working on? Select one: A. Forecasting Financial Requirement B. Cash Management C. Acquiring Necessary Capital D. Investment Decision
The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained earnings is used in the firm's WACC calculation. However, if the firm will have to issue new common stock, the cost of new common stock should be used in the firm's WACC calculation. Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd, is 9.9%, the firm's cost of preferred stock, rp, is 9.1% and the firm's cost of equity is 12.5% for old equity, rs,…
Which of the following statements is false? A. Mutual funds are pool investor funds to purchase financial instruments and thus reduce risks through diversification. B. Initial public offering (IPO) occurs when firm issues stock in the public market for the first time. C. The difference between current assets and non-current assets equals to working capital. D. Owner’s equity is the residual interest in assets that remains after subtracting an entity’s liabilities.
All of the following are sustainable methods businesses can use to raise capital (funding) except for ________. borrowing from lenders selling ownership shares profitable operations tax refunds
Excluding Venture Capital, what are the sources of equity funding from external sources. Please list each one and explain each method and how each method might be applied differently depending on the nature, scale and vision of the company seeking the funds.