Exam 18: Capital Structure and the Cost of Capital

If a firm has total long-term capital of $1,000,000, preferred stock of $500,000, preferred dividends of $10 and preferred stock price of $100, the weighted cost of capital is: Bad item-can't tell as no cost of debt given.Strange, too, there is no common stock.

All of the following statements are correct except:

All of the following statements are correct except:

The sustainable growth rate measures how quickly a firm can grow when it uses both internal equity and debt financing to keep its capital structure constant over time.

The greater the total fixed operating costs of a firm, the greater the degree of operating leverage and the greater the degree of combined leverage.

Given the conflict between risk and return, the purpose of capital structure management is to find the debt level:

All of the following statements are correct except:

What should be the relation between the target capital structure for a firm and the firm's optimum capital structure?

Operating leverage affects the top portion of a firm's income statement whereas financial leverage affects the bottom half of the income statement.

All of the following statements are correct except:

All of the following statements are correct except:

Ningbo Shipping has issued preferred stock at its $125 per share par value.The stock will pay a $15 annual dividend.The cost of issuing and selling the stock was $4 per share.The cost of Ningbo Shipping preferred stock is:

The estimate of how quickly a firm may grow by maintaining a constant mix of debt and equity is called:

The cost of capital for retained earnings:

Which of the following costs must be adjusted to an after-tax cost?

A decrease in the debt ratio will normally have no effect on:

If a firm pays out 30% of its earnings as dividends and has averaged a 20 percent return on assets, how quickly can the firm grow without needing to secure outside funding sources?

A firm's degree of combined leverage is the product of its degree of operating leverage and its degree of financial leverage

The EPS/EBIT indifference level represents the level of Assets at which the firm would be indifferent between two different capital structures because they both result in the same level of EPS.

Other factors being constant, higher fixed financial costs mean: