Financial Management - Study Mode

[#681] Bond risk premium is added in to bond yield to calculate the
Correct Answer

(C) cost of common stock

Explanation

Solution: Bond risk premium is added in to bond yield to calculate the cost of common stock. The cost of common stock is common stockholders' required rate of return. Companies can raise new common equity in two ways: by a new common stock issue or by retaining and reinvesting previous earnings.

[#682] Stock selling price is Rs 45, an expected dividend is Rs 10 and an expected growth rate is 8% then cost of common stock would be
Correct Answer

(D) 30.22%

[#683] A type of beta which incorporates about company such as changes in capital structure is classified as
Correct Answer

(D) fundamental beta

Explanation

Solution: A type of beta which incorporates about company such as changes in capital structure is classified as fundamental beta. A measure that helps determine the potential risk of a security using current and future predicted fundamental information of the company, including market-related and financial data.

[#684] Dividend per share is Rs 18 and sell it for Rs 122 and floatation cost is Rs 4 then component cost of preferred stock will be
Correct Answer

(A) 15.25%

[#685] Value of stock is Rs 1200 and preferred dividend is Rs 120 then required rate of return would be
Correct Answer

(B) 10.00%

Explanation

Solution: Required rate of return = Preferred dividend / Value of stock * 100 = 120 / 1200 * 100 = 10.00%