What is the blend of long-termfinancial sources used to finance thefirm which may include debt, equity?and preferred stockاخترأحد الخیاراتa. Working Capital Ob. Profit Maximizationc. None of the optiond. Risk and Returne. Capital Budgeting O

Explanation: The above options can be explained as follows: a) Working capital : Working capital is…

Answered: What is the blend of long-term ncial…

Business

Finance

What is the blend of long-term ncial sources used to finance the n which may include debt, equity ?and preferred stock

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 1Q: Define each of the following terms: Weighted average cost of capital, WACC; after-tax cost of debt,...

See similar textbooks

Related questions

Q: How does preferred stock differ from bothcommon equity and debt? Is preferred stock morerisky than…

A: Difference between equity stock and preference stock: Both equity shares and preference shares…

Q: The cost of equity capital for non-dividend paying stocks can be determined by ____. I. using the…

A: CAPM = Risk free Rate + Beta * Market Risk Premium As per Dividend Discount Model,Ke = (D1/P0) +…

Q: The minimum rate of return a firm must earn on its assets to maintain the current value of its…

A: The choice of financing makes the cost of capital a crucial variable for every company, as it will…

Q: All of the following methods may be used to determine the cost of equity capital (k e) for a…

A: Various methods may be used to determine the cost of capital

Q: calculate the: -after-tax cost of debt -the cost of preferred stock -the cost of equity from…

A: A combination of long-term debts and different types of stocks to raise funds for the business…

Q: What does the treasury stock method, “proceeds” include?

A: Earnings per share (EPS): The amount of net income available to each shareholder per common share…

Q: How can I calculate CF or (dividends + buyback) in Implied equity risk premium? (By example of…

A: Implied ERP is calculated by first calculating the Return on Equity using constant dividend growth…

Q: How are preliminary levels of debt, preferred stock, common stock,and dividends projected?

A: The debt, preferred stock, common stock and dividends are projected on the basis of the unlevered…

Q: Outline the advantages and disadvantages of dealing with preference shares from debt holders’ point…

A: A company has several sources from where it can raise funds. It can issue equity shares and the…

Q: What is the blend of long-term financial sources used to finance the firm which may include debt,…

A: Long term financial sources could be debt, equity or preferred stock. The blend of these is required…

Q: How is preferred stock similar to long-term debt? How is it comparable to equity?

A: The Answer :

Q: Define Rate of return on stock investment.

A: Capital Stocks: Common stock and preferred stock are the two types of capital stocks. Common…

Q: What is the formula for the Debt to Earnings Ratio? (Assume Preferred Stock Dividends)

A: a. Debt to earnings Ratio - This ratio is indicates the monthly income generated to pay its…

Q: Is the equation used to value preferred stock more like the oneused to evaluate perpetual bonds or…

A: Answer: The equation used to value preferred stock is more likely to the one used to evaluate…

Q: What are the steps involved in valuation of supernormal growth stock?

A: Supernormal growth stock is a stock which experiences a robust growth at initial levels and later…

Q: What is meant by the dividend yield on a common stock investment?

A: Not all the tools of fundamental analysis work for every investor on every stock. For dividend…

Q: Which of the following is not a long term source of capital? a. Preferred stock b. Common stock c.…

A: Sources of capital can be long-term and short-term. Those sources which have a repayment period of…

Q: What are the computational guidelines for determiningwhether a convertible security is to be…

A: Convertible securities: Convertible security is a security that has the potential to be converted to…

Q: n the general stock and bond markets lead to changes in the required rate of return on a firm’s…

A: Step 1 The required reimbursement rate is the minimum refund that an investor will receive from…

Q: Use the following data for the Sara Company to calculate the cost of common stocks (Rs), the cost of…

A: given, Rf=7% Rm=25% beta=1.5 according to CAPM model: Rs=rf+beta×rm-rf=7%+1.5×25%-7%=34% answer: The…

Q: long-term debt, preferred stock, and commercial paper

A: Debt that matures in more than one year is called long-term debt. Long-term debt is a liability for…

Q: Of the following metrics, which is most likely used in present value calculation of equity shares?…

A: The cash which is generating by the company for the purpose of carrying its' operations of trading…

Q: When using discounted dividend method to estimate stock price, which of the following should be used…

A: When using discounted dividend method to estimate stock price, used required return of equity as…

Q: Explain how to calculate rate of return on common stockholder’s equity.

Q: What does the book value of debt and equity refer to? O A. The par values of common stock and the…

A: The par value of stock is the price which is usually set at when the stock is issued. It is present…

Q: How do stock repurchases affect the EPS and ROE ratios?

A: Ratio analysis: The analysis of a company using the financial ratios and comparing its trends and…

Q: What are the three potential features of preferred stock? Indicate whether each feature makes the…

Q: Is preferred stock comparable to long-term debt in any way? Is it comparable to equity in any way?

A: Preferred stocks are the form of shares being issued by a company for increasing its capital. The…

Q: Is Preferred stock a hybrid between common stock and debt? Explain how?

A: Answer: Preferred stock is identified with a preferred name. Preference stock is often granted…

Q: What are the differences of the preferred stock features: cumulative dividends, participating,…

A: Preferred stock is a type of company stock that differs from ordinary stock in that it has special…

Q: a Calculate the cost of each capital component: i the after-tax cost of debt| i the cost of…

A: Note: This post has several qeuestions. The first question, with its three sub-parts, has been…

Q: b) Calculate the cost of preferred shares for Y capital structure.

A: Data for cost of preferred shares for Y capital structure. Preferred share capital = $ 15 million…

Q: Which of the following sources of financing has the lowest explicit cost? a common stock b…

A: Explicit cost are out of pocket cost.

Q: explain the differences between equity capital and debt capital. which category would stocks fall…

A: Capital is the requirement of the business. As per requirement of short term or long term…

Q: Explain the treasury-stock method as it applies to options and warrants in computing dilutive…

A: Potentially dilutive security: Potentially dilutive security refers to a security that can be…

Q: Explain the treasury-stock method as it applies to optionsand warrants in computing dilutive…

A: Treasury stock: The shares which were reacquired or bought back by the company, but not formally…

Q: The following data concerning Sumitomo Co' capital structure is available. ¥ millions Accounts…

A: The question is related to Cost of Capital.The Weighted Average Cost of Capital is overall post rax…

Q: What financial ratios would a credit rating agency such as Moody’s or Standard & Poor’s be most…

A: Credit analysts and equity analysts use financial ratios to analyze various aspects of a company.…

Q: How does preferred stock compare to long-term debt? In what respects is this comparable to equity?

A: The preferred stock and common stock are the financial instruments to raise money from the market.

Q: Which lists the financing options from less to more risky? * A. Preference shares, Ordinary shares…

A: The funds generated by the sale of stock are referred to as Equity financing. The primary benefit of…

Q: The CAPM is one of the most commonly used ways to determine the Select one: O a. Cost of preferred…

A: CAPM means capital assets pricing mode. Cost of equity means cost of raising the money from common…

Q: How does one calculate the capital gains yield and the dividendyield of a stock?

A: Capital gain yield: The capital gain yield mainly refers to the increase in the security’s price,…

Question

What is the blend of long-term
financial sources used to finance the
firm which may include debt, equity
?and preferred stock
اخترأحد الخیارات
a. Working Capital O
b. Profit Maximization
c. None of the option
d. Risk and Return
e. Capital Budgeting O

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

What is the value of Ls stock for volatilities between 0.20 and 0.95? What incentives might the manager of L have if she understands this relationship? What might debtholders do in response?
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.
Define each of the following terms: Weighted average cost of capital, WACC; after-tax cost of debt, rd(1 – T); after-tax cost of short-term debt, rstd(1 – T) Cost of preferred stock, rps; cost of common equity (or cost of common stock), rs Target capital structure Flotation cost, F; cost of new external common equity, re
One position expressed in the financial literature is that firms set their dividends as a residual after using income to support new investments. Explain what a residual policy implies (assuming that all distributions are in the form of dividends), illustrating your answer with a table showing how different investment opportunities could lead to different dividend payout ratios.
What is the blend of long-term financial sources used to finance the firm which may include debt, equity and preferred stock? Select one: a. Risk and Return b. Profit Maximization c. Capital Budgeting d. Working Capital e. None of the option
What is the blend of long-term financial sources used to finance the firm which may include debt, equity and preferred stock? اخترأحد الخيارات a. Risk and Return b. Capital Budgeting c. Profit Maximization d. None of the option e. Working Capita
The relationship between WACC and investors' required rates of return The required rate of return of an investor is the rate of return that an investor demands to purchase a firm’s stocks or bonds and thus provide funds for capital investment. Therefore, required returns from the investors’ point of view correspond to the required returns or the weighted average cost of capital (WACC) from the firm’s point of view. Indicate in the following table whether each of the statements about WACC and the required rates of return of investors is true or false. Statement True False Flotation costs increase the cost of newly issued stock compared to the cost of the firm’s existing, or already outstanding, common stock or retained earnings. The firm’s cost of debt is what an investor is willing to pay for the firm’s stock before considering flotation costs. The amount that an investor is willing to pay for a firm’s bonds is inversely related to the…
Which of the following statements are correct? Preferred equities are separate form common equities Opportunity cost should not be included in the capital budgeting decision Retained earnings are important in calculating the WACC Weights for equity in the WACC calculation are always on book values Cash from net working capital for each year is defined as NWCn- NWCn-1
What is the blend of long-term financial sources used to finance the firm which may include debt, equity and preferred stock? اخترأحد الخيارات a. Risk and Return b. Capital Budgeting c. Profit Maximization d. None of the option e. Working Capital Creditors look for a. Net working capital for their safety b. High net working capital for their safety c. Less net working capital for their safety d. None of the options e. Balance net working capital for their safety
Define each of the following terms:a. Capital; capital structure; optimal capital structureb. Business risk; financial riskc. Financial leverage; operating leverage; operating breakevend. Hamada equation; unlevered betae. Symmetric information; asymmetric informationf. Modigliani-Miller theoriesg. Trade-off theory; signaling theoryh. Reserve borrowing capacity; pecking orderi. Windows of opportunity; net debt
Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting? a. Accounts payable. b. Preferred stock. c. Common stock raised by new issues. d. Long-term debt. e. Common stock "raised" by reinvesting earnings.
There are two concepts in respect of working capital Select one: a. None of the options b. Cost of preferred stocks and cost of loans c. Preference share capital and long term assets d. Gross working capital and net working capital e. Cost of bonds and cost of preferred stocks