73. New common stock is more expensive than KeA. to compensate for risk.B. to compensate for more dividends.C. to compensate for expansionary problems.D. to cover distribution costs.

74. In computing the cost of common equity, if D1 goes downward and Pogoes up, Kewill

75. In determining the cost of retained earnings

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Chapter 11 - Cost of Capital76. Within the capital asset pricing model

77. Using the constant growth model, a firm's expected (D1) dividend yield is 4% of the stock price, and its growth rate is 5%. If the tax rate is .35%, what is the firm's cost of equity? A. 10%B. 6.65%C. 9.0%D. More information is required

78. Expected cash dividends are $3.00, the dividend yield is 4%, flotation costs are 4% of price, and the growth rate is 3%. Compute cost of new common stock.

79. A firm's stock is selling for $65. The dividend yield is 6%. A 7% growth rate is expected for the common stock. The firm's tax rate is 40%. What is the firm's cost of retained earnings?

80. A firm's stock is selling for $62. The next annual dividend is expected to be $3.00. The growth rate is 9%. The flotation cost is $5.00. What is the cost of retained earnings?

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Chapter 11 - Cost of Capital81. For many firms, the cheapest and most important source of equity capital is in the form of A. debt.B. common stock.C. preferred stock.D. retained earnings.

82. Retained earnings has a cost associated with it because:

83. There may be a change in the marginal cost of capital curve because

84. The after-tax cost of debt will almost always be below