Cost of retained earnings-cost of new outside equity capital

Assignment Help Financial Management
Reference no: EM13809640

Discuss the following statement: “The cost of retained earnings is less than the cost of new outside equity capital. Consequently, it is totally irrational for a firm to sell a new issue of stock and to pay dividends during the same year.”

Reference no: EM13809640

Questions Cloud

Shares of stock outstanding with a current market value : Frozen Yogurt Palace has 370,000 shares of stock outstanding with a current market value of $37.00 a share. You own 48,000 of those shares. Next month the election will be held to select four new members to the board of directors.
Military sexual harassment : Military Sexual Harassment
Should the investment be undertaken : The Horizon Company will invest $60,000 in a temporary project that will generate the following cash inflows for the next three years. The firm will also be required to spend $10,000 to close down the project at the end of the three years. If the cos..
Semi annual coupon bond and a zero coupon bond : Suppose your company needs to raise $15 million and you want to issue 21-year bonds for this purpose. Assume the required return on your bond issue will be 4 percent, and you're evaluating two issue alternatives: a 4 percent semi annual coupon bond a..
Cost of retained earnings-cost of new outside equity capital : Discuss the following statement: “The cost of retained earnings is less than the cost of new outside equity capital. Consequently, it is totally irrational for a firm to sell a new issue of stock and to pay dividends during the same year.”
Write a program that establishes two savings accounts : Write a program that establishes two savings accounts with saver1 having account number 10002 with an initial balance of $2,000, and saver2 having account 10003 with an initial balance of $3,000
Python scripting language : Your programming project will be a simple, working program, using a Python scripting language, which utilizes a good design process and includes: Sequential, selection, and repetitive programming statements as well as and At least one function call
Calculate the real exchange rate : Consider the following data on USDMXN and price levels in the United States and Mexico. Calculate the real exchange rate at t=0.
Community collaboration : Community Collaboration

Reviews

Write a Review

Financial Management Questions & Answers

  What is the amount of net fixed assets

Pearce’s has a long-term debt ratio of .45 and a current ratio of 1.25. Current liabilities are $875, sales are $5,780, profit margin is 9.5%, and ROE is 18.5%. What is the amount of net fixed assets?

  What is the equity multiplier and return on equity

Locker Company has a debt-equity ratio of .65. Return on assets is 9.8 percent, and total equity is $850,000. What is the equity multiplier? Return on equity? Net income?

  What is the profitability index if the discount rate

The Company X. is currently considering a project that will produce cash inflows of $12,000 a year for three years followed by $6,500 in year four. The cost of the project is $38,000. What is the profitability index if the discount rate is 7 percent?

  Risk free rate is 6percentage and the market risk premium

Assume the risk free rate is 6percentage and the market risk premium is 6 percentages. The stock of physician care network is (PCN) has a beta of 1.5. The last dividend paid by PCN (D0) was $2 per share.

  Large public corporations with subsidiaries throughout world

Both Berkley and Oakley are large public corporations with subsidiaries throughout the world. Berkley uses a centralized approach and makes most of the decisions for its subsidiaries. Oakley uses a decentralized approach and its subsidiaries make man..

  Standard deviation of the investors portfolio

Assume the annual average return on the S&P500 is 13.7% with a standard deviation of 17.5%. A risk-free asset has an annual average return of 4.0% with a standard deviation of 0.0% and a correlation with the S&P500 index of +0.00. An investor invests..

  Premium bond making annual payments

Bond X is a premium bond making annual payments. The bond has a coupon rate of 9 percent, a YTM of 7 percent, and has 13 years to maturity. Bond Y is a discount bond making annual payments. This bond has a coupon rate of 7 percent, a YTM of 9 percent..

  Comparison of market yields on securities

This is a comparison of market yields on securities, assuming all characteristics except maturity are the same.

  Prepare a line graph

Prepare a line graph showing the budgeted total revenues and total expenditures

  Treasury bonds currently have a nominal yield

Assume that 4-year Treasury Bonds currently have a nominal yield of 6.2%, and a 4-year Corporate Bonds have a nominal yield of 8.5%. If Maturity Risk Premium (MRP) on all 4-year contracts currently is 1.3%, and Corporate Bonds currently have addition..

  Calculate bond equivalent yield and effective annual return

Calculate the bond equivalent yield and effective annual return on a jumbo CD that is 115 days from maturity and has a quoted nominal yield of 6.62 percent.

  Vast resources available to mutual fund managers

Given the vast resources available to mutual fund managers, these managers on average have generally:

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd