Business Finance 2023 Multiple Choice
1 All else constant an increase in a firm s cost of debt will result in an increase in 2023
1. All else constant, an increase in a firm’s cost of debt will:
result in an increase in the firm’s cost of capital..
lower the firm’s weighted average of capital.
lower the firm’s external cost of new equity.
increase the firm’s capital structure of debt.
increase the firm’s capital structure weight of equity.
2. Judy’s Boutique just paid an annual dividend of $1.65 on its common stock. The firm increases its dividend by 2.5 percent annually. What is the rate of return on this stock if the current stock price is $38.20 a share?
3. Winter Wear, Inc. has 6 percent bonds outstanding that mature in 13 years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $993 each. What is the firm’s pre-tax cost of debt?
4. The 7.5 percent preferred stock of Home Town Brews is selling for $43 a share. What is the firm’s cost of preferred stock if the tax rate is 34 percent and the par value per share is $100?
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