the cost if common equity financing is more difficult to estimate than the cost of debt...
Which of the following statements is CORRECT? Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce its WACC Increasing a company's debt ratio will typically reduce the marginal cost of both debt and equity financing; however, this action still may raise the company's WACC Increasing a company's debt ratio will typically increase the marginal cost of both debt and equity financing; however, this action still may lower the company's WACC Since a firm's...
The cost of debt is usually lower than the cost of equity. The reason firms don't use only debt financing is: Multiple Choice as the use of debt increases, the cost of debt decreases until no debt financing is available as the use of debes, so does the cost of equity as the use of debt increases, so does the tax rebate that the firm receives as the use of debt increases, government regulation increases
An investment amount of $10M has to be raised through equity financing and debt financing. The required debt ratio is 0.40 and the company tax rate is 35%. a) The current market price of the company’s common stock is $50 and the current dividend is $5 and the dividend is expected to grow at 5% annual rate. The floating cost of issuing a common stock is 10%. Preferred stocks of $100 par value with 10% fixed annual dividend can also...
Debt financing is considered riskier than equity financing because of its required payments of interest and principal. True or False
Evans Technology has the following capital structure. Debt Common equity The aftertax cost of debt is 9.00 percent, and the cost of common equity in the form of retained earnings) is 16.00 percent. a. What is the firm's weighted average cost of capital? (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost Debt Common equity Weighted average cost of capital 0.001% An outside consultant has suggested that because debt is cheaper...
Evans Technology has the following capital structure. 35% Debt Common equity The aftertax cost of debt is 8.00 percent, and the cost of common equity (in the form of retained earnings) is 15.00 percent. a. What is the firm's weighted average cost of capital? (Do not round Intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost Debt Common equity Weighted average cost of capital An outside consultant has suggested that because debt is cheaper...
The difference between equity financing and debt financing is that equity financing involves borrowing money. equity financing involves selling part of the company. debt financing involves selling part of the company. debt financing means the company has no debt.
A difference between debt financing and equity financing is that: Multiple Choice debt financing must be repaid, while repayment of equity financing is not required. equity financing must be repaid, while repayment of debt financing is not required. only debt financing can be used to purchase assets. only equity financing can be used to purchase assets.
Estimate both the cost of debt and the cost of equity. Explain how to estimate the Corporate Cost of Capital and provide the formula used for CCC.
Why are claims on income discretionary with equity financing but nondiscretionary with debt financing?