Homework Answers
C. When based on dividend growth firm risks are ignored is true.
It is wrong to assume dividend grow at a certain rate in the coming years.It is difficult for a company to have a constant dividend growth due to business cycle and financial difficulties.
Also there is difference in discount factor and dividend rate.Required rate of return if less than dividend growth it will throw a negative value and does not show a true picture.
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Which is true for a firm's cost of equity: Select one a. It equals risk-free rate...
Which is true for a firm's overall cost of equity: Select one: a. It is generally...
Which is true for a firm's overall cost of equity: Select one: a. It is generally less than the firm's after-tax cost of debt b. It is generally less than a leveraged firm's WACC c. It is dependent on growth rate and risk level of the firm d. li is unaffected by changes in the market risk premium Which one of the following is the primary determinant of a firm's cost of capital? Select one: a. Use of Funds b....
The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is...
The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is 4.67% while the market risk premium is 6.63%. The Jefferson Company has a beta of 0.92. Using the capital asset pricing model (CAPM) approach, Jefferson's cost of equity is 11.3085% The cost of equity using the bond yield plus risk premium approad 10.779 11.847% The Harrison Company is dosely held and, therefore, cannot generate relis cost of internal equity. Harrison's bonds yield 11.52%, and...
The cost of equity using the CAPM approach The current risk-free rate of return (rRF) is...
The cost of equity using the CAPM approach The current risk-free rate of return (rRF) is 3.86%, while the market risk premium is 5.75%. The Jefferson Company has a beta of 0.92. Using the Capital Asset Pricing Model (CAPM) approach, Jefferson's cost of equity is 9.15% 9.61% 10.98% 10.07% The cost of equity using the bond yield plus risk premium approach | The Adams Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM...
The cost of equity using the CAPM approach The current risk-free rate of return (RF) is...
The cost of equity using the CAPM approach The current risk-free rate of return (RF) is 4.23%, while the market risk premium is 6.63%, the Burris Company has a beta of 0.92. Using the Capital Asset Pricing Model (CAPM) approach, Burris's cost of equity is The cost of equity using the bond yield plus risk premium approach The Lincoln Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company's...
The CPM estimate or rs is equal to the risk free rate, Tre, plus a nisk...
The CPM estimate or rs is equal to the risk free rate, Tre, plus a nisk premium that is equal to the nsk premium on an average stock, (M ), scarea up or down to reflect the particular stock's risk as measured by its beta coefficient, b. This model assumes that a firm's stockholders are Select diversified, but if they are Select diversified, then the firm's true investment risk would not be measured by Select and the CAPM estimate would...
5. The cost of retained earnings1 True or False: It is free for a company to...
5. The cost of retained earnings1 True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. True False The cost of equity using the CAPM approach The current risk-free rate of return (Rp) is 3.86%, while the market risk premium is 5.75%, the Allen Company has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Allen's...
4. The cost of retained earnings True or False: It is free for a company to...
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. False O True The cost of equity using the CAPM approach The current risk-free rate of return (rRF) is 4.67% while the market risk premium is 6.17%. The D'Amico Company has a beta of 0.92. Using the capital asset pricing model (CAPM) approach,...
True or False: It is free for a company to raise money through retained earnings, because...
True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. O False True The cost of equity using the CAPM approach The current risk-free rate of return (rf) is 4.23%, while the market risk premium is 6.63%. the Roosevelt Company has a beta of 0.78. Using the Capital Asset Pricing Model (CAPM) approach, Roosevelt's cost of equity is The...
4. The cost of retained earnings True or False: It is free for a company to...
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. False True The current risk-free rate of return is 4.60% and the current market risk premium is 5.70%. Green Caterpillar Garden Supplies Inc. has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Green Caterpillar's cost of equity is Cute...
All else constant, which one of the following will increase a firm's cost of equity if...
All else constant, which one of the following will increase a firm's cost of equity if the firm computes that cost using the security market line approach? Assume the firm currently pays an annual dividend of $1 a share and has a beta of 1.2. An increase in the risk-free rate. A reduction in the firm's beta. An increase in the dividend amount. O A reduction in the dividend amount. A reduction in the market rate of return.
Which is true for a firm's overall cost of equity: Select one: a. It is generally less than the firm's after-tax cost of debt b. It is generally less than a leveraged firm's WACC c. It is dependent on growth rate and risk level of the firm d. li is unaffected by changes in the market risk premium Which one of the following is the primary determinant of a firm's cost of capital? Select one: a. Use of Funds b....
The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is 4.67% while the market risk premium is 6.63%. The Jefferson Company has a beta of 0.92. Using the capital asset pricing model (CAPM) approach, Jefferson's cost of equity is 11.3085% The cost of equity using the bond yield plus risk premium approad 10.779 11.847% The Harrison Company is dosely held and, therefore, cannot generate relis cost of internal equity. Harrison's bonds yield 11.52%, and...
The cost of equity using the CAPM approach The current risk-free rate of return (rRF) is 3.86%, while the market risk premium is 5.75%. The Jefferson Company has a beta of 0.92. Using the Capital Asset Pricing Model (CAPM) approach, Jefferson's cost of equity is 9.15% 9.61% 10.98% 10.07% The cost of equity using the bond yield plus risk premium approach | The Adams Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM...
The cost of equity using the CAPM approach The current risk-free rate of return (RF) is 4.23%, while the market risk premium is 6.63%, the Burris Company has a beta of 0.92. Using the Capital Asset Pricing Model (CAPM) approach, Burris's cost of equity is The cost of equity using the bond yield plus risk premium approach The Lincoln Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company's...
The CPM estimate or rs is equal to the risk free rate, Tre, plus a nisk premium that is equal to the nsk premium on an average stock, (M ), scarea up or down to reflect the particular stock's risk as measured by its beta coefficient, b. This model assumes that a firm's stockholders are Select diversified, but if they are Select diversified, then the firm's true investment risk would not be measured by Select and the CAPM estimate would...
5. The cost of retained earnings1 True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. True False The cost of equity using the CAPM approach The current risk-free rate of return (Rp) is 3.86%, while the market risk premium is 5.75%, the Allen Company has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Allen's...
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. False O True The cost of equity using the CAPM approach The current risk-free rate of return (rRF) is 4.67% while the market risk premium is 6.17%. The D'Amico Company has a beta of 0.92. Using the capital asset pricing model (CAPM) approach,...
True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. O False True The cost of equity using the CAPM approach The current risk-free rate of return (rf) is 4.23%, while the market risk premium is 6.63%. the Roosevelt Company has a beta of 0.78. Using the Capital Asset Pricing Model (CAPM) approach, Roosevelt's cost of equity is The...
4. The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. False True The current risk-free rate of return is 4.60% and the current market risk premium is 5.70%. Green Caterpillar Garden Supplies Inc. has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Green Caterpillar's cost of equity is Cute...
All else constant, which one of the following will increase a firm's cost of equity if the firm computes that cost using the security market line approach? Assume the firm currently pays an annual dividend of $1 a share and has a beta of 1.2. An increase in the risk-free rate. A reduction in the firm's beta. An increase in the dividend amount. O A reduction in the dividend amount. A reduction in the market rate of return.
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