Financial Management - Study Mode

[#881] Use of Preference Share Capital in Capital structure:
Correct Answer

(B) Increases FL

[#882] Bond risk premium is 3% and bond yield is 10.2% then cost of common stock will be
Correct Answer

(B) 13.20%

Explanation

Solution: Common Stock = Bond yeild + Bond risk premium 10.2% + 3% = 13.20%.

[#883] Cost of new debt or marginal debt is also classified as
Correct Answer

(D) Both A and B

Explanation

Solution: Cost of new debt or marginal debt is also classified as historical rate and embedded rate.

[#884] Bond yield is 12% and bond risk premium is 4.5% then cost of common stock would be
Correct Answer

(C) 16.50%

Explanation

Solution: Common Stock = Bond yeild + Bond risk premium
12% + 4.5% = 16.50%.

[#885] Forecast by analysts, retention growth model and historical growth rates are methods used for an
Correct Answer

(A) estimate future growth

Explanation

Solution: Forecast by analysts, retention growth model and historical growth rates are methods used for an estimate future growth.