Which of the following statements is CORRECT?   Group of answer choices   When calculating the cost of preferred stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation.   Because of tax effects, an increase in the risk-free rate will have a greater effect on the after-tax cost of debt than on the cost of common stock as measured by the CAPM.   If a company's beta increases, this will increase the cost of equity used to calculate the WACC, but only if the company does not have enough reinvested earnings to take care of its equity financing and hence must issue new stock.   Higher flotation costs reduce investors' expected returns, and that leads to a reduction in a company's WACC.   When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible by the paying corporation.

Q: Which of the following statements is correct?   a. Companies may pay too high a price in a large…

A: companies may pay a high price in a large open market to repurchase its shares because it needs to…

Q: Which of the following statements regarding the capital structure is CORRECT? Group of answer…

A: Capital structure is the combination of equity and debt of the business used to finance its…

Q: If you bought a share of common stock, you would probably expect to receive dividends plus an…

A: Answer: Introduction: Dividend is nothing but that a portion of earnings that is available to…

Q: Why is the cost of retained earnings cheaper than the cost of issuing new common stock? Group of…

A: Cost of retained earnings is the cost of financing through internal equity, where as cost of issuing…

Q: Which of the following is a characteristic of preferred stock? A. Give voting rights to its owner.…

A: Preferred Stock: They are the combination of equity shares and debt components of capital structure.…

Q: Consider the following statements: If dividends are taxed more heavily than capital gains, then…

A: Dividend is regarded as cash or reward provided to the investors for their investments. It is paid…

Q: If you take corporate taxes and the cost of financial distress are into consideration, the market…

A: The cost of conducting business that a company in financial crisis faces, such as a greater cost of…

Q: Consider the following statements: If dividends are taxed more heavily than capital gains, then…

A: Capital Gain:-It refers to an increase in a capital asset's value and is considered to be realized…

Q: hich of the following is true of (ordinary) preferred shares? The larger a company’s profit, the…

A: The preferred shares are those shares that get the dividend before the common stock. The preferred…

Q: . On the day an IPO comes out, the market pricecan rise above the offering price or fall below…

A: Leaving the money in the table refer to deliberate under-pricing of stocks in initial public…

Q: Why might a company repurchase its own stock? A) It believes that the market undervalues its shares…

A: Introduction: Common stock is owners' capital contributed in the business. Holders of the common…

Q: The Discounted Dividend Model and the Corporate Valuation Model are two different ways to determine…

A: a.The Corporate Valuation Model can be used for companies with uneven cashflow growth rates and the…

Q: To the corporate investor, preferred stock offers which of the following advantages? a. 70% of…

A: Preferred stocks give preference shareholders a priority claim over the equity shareholders whenever…

Q: One position expressed in the financial literature is that firms set their dividends as a residual…

A: The set up of the policy of dividend residual is because the fresh equity stock is costlier than the…

Q: Which of the following statements regarding long-term financing methods is most CORRECT? Group of…

A: Long Term Financing refers to the finance by loan or borrows for a term period of more than one year…

Q: Neptune Corporation is following the residual dividend policy with regard to the payment of cash…

A: Dividends are distribution of surplus profits by a firm to its shareholders as a return for…

Q: The after-tax cost of preferred stock capital is:  Group of answer choices  Always equal to the…

A: After tax cost of preferred stock = Before tax cost of preferred stock x (1 - tax rate)

Q: In the theoretical world of Miller and Modigliani, ____.   a. a firm should pay out 100% of…

A: According to Miller and Modigliani, in a perfect capital market there is no transaction cost and…

Q: What is the optimal dividend policy with taxes when the dividend ta capital gain tax rate? Why does…

A: Capital gain tax refers to the tax or mandatory charged levied by the government over the profit…

Q: True or False: Based on the company’s earnings in a particular year, repurchases can be made on an…

A: Repurchase is purchase of own shares of company to distribute wealth among shareholders.

Q: Indicate whether the following statements are true or false. If the statementis false, explain…

A: true

Q: Based upon the empirical evidence, state whether the following statements are true or false, and…

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…

Q: Identify and explain each of the if it encourage a firm to increase or decrease debt in its capital…

A: Answer a: If there is an increase in the corporate tax rate, it would encourage a firm to increase…

Q: How would each of the following changes tend to affect aggregate (i.e., the average for…

A: Payout ratio is the profitability ratio required for analysis from owner’s point of view which…

Q: Which of the following statement is NOT a function of the stock market in a market economy? A. to…

A: Introduction : In simple words, stock market refers to the sum of buyers and sellers of stocks of…

Q: Consider each of the following statements, state whether you believe they are true or false and…

A: NOTE: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts…

Q: Which of the following statements is most likely FALSE? A. We should use the general dividend…

A: The dividend discount model values a company by discounting the future dividends. The present value…

Q: a) – Explain the concept of Tax Deduction in WACC. Does this tax deduction make debt finance Cheaper…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: rue or False: The following statement accurately describes how firms make decisions related to…

A: Floatation cost incurred by the company will increase the cost of new common stock.  So, the correct…

Q: Which of the following statements concerning common stock and the investment banking process is NOT…

A: Common stock is the ordinary shares issued by the company. It is presented in the balance sheet…

Q: FAMA is considering issuing new common stock and using the proceeds to reduce its outstanding debt.…

A: The Fama Corp. is Considering issuing Common stock which does not affect Total assets, Interest rate…

Q: How would each of the following scenarios affect a firm's cost of debt, r d (l - t), t=tax rate; its…

A: rd(1 - t) rS WACC Corporate tax rate is lowered I N I As tax rate is lowered cost of debt…

Q: Which of the following statements is CORRECT? * Assume a corporation has less debt than what is…

A: The capital structure is a technique in which the company has use the mix use of debt and equity to…

Q: QUESTION 37 Which of the following statements is true concerning companies that do not pay…

A: Dividends are part of profit received by shareholders. Some investors invest only for capital gains…

Q: Schalheim Sisters Inc. has always paid out all of its earnings as dividends; hence, the firm has no…

A: The right answer is option (d). Under the CAPM method, the cost of capital is calculated by,  first…

Q: True or False: The following statement accurately describes how firms make decisions related to…

A: Answer for True/ False statement is as follows:False: Flotation costs are additional costs…

Q: ens to the firm’s cost of equity, cost of debt, and cost of capital when the firm increases the…

A: Note : As per the guidelines, only first question will be answered. Kindly post the remaining…

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.