Common equity is higher than cost of internal equity

Assignment Help Financial Management

Reference no: EM13883724

1. If the cost of new common equity is higher than the cost of internal equity, why would a firm choose to issue new common stock?

2. Calculate all MCC break points for the following information:

Total assets = $1,500,000

Total debt = $600,000

Total equity = $900,000

kd is 10% up to $500,000; 11% after $500,000

ks is 13% up to $100,000; 14% after $100,000

3. Your firm’s ks is 10%, the cost of debt is 6% before taxes, and the tax rate is 40%. Given the following balance sheet, calculate the firm’s after tax WACC:

Total assets = $25,000

Total debt = $15,000

Total equity = $10,000

4. Explain the difference between WACC and MCC.

5. What determines whether to use the dividend growth model approach or the CAPM approach to calculate the cost of equity?

Reference no: EM13883724

Questions Cloud

The values of the sysuptime in the system group : An SNMP manager sends a request for the values of the sysUpTime in the System group. Write the PDU with the fields filled in for the get-request PDU

What is the holding period return : Assume you short sell 300 share of the stock of EFG Corporation. Margin requirements are 60 percent. The price was $34 per share. One year later, the price of the stock is $35 per share. During that time, the company paid $0.75 per share in dividends..

A network manager discovers that a network component : A network manager discovers that a network component is performing poorly and issues an order to the technicians to replace it. Which MIB group contains the information for the technician to find out the physical location of the component?

Explain how the sources of energy you identified impact : Explain how the sources of energy you identified impact the environment

Common equity is higher than cost of internal equity : If the cost of new common equity is higher than the cost of internal equity, why would a firm choose to issue new common stock? Explain the difference between WACC and MCC. What determines whether to use the dividend growth model approach or the CAPM..

User defined objects with constructors : User defined objects with constructors A two dimensional array Objects are an important part of this project. I want to see that you have an understanding of how to develop your own objects/classes.

Staples statement of cash flows reports expenditures : Locate the statement of cash flows of Staples for the fiscal year ended January 29, 2011 on the Internet.

How much is paid to the retailers vendor : A retailer purchases goods that have a list price of $7,500. The manufacturer allows a trade discount of 40-25-10 and a cash discount of 2/10, net 30. If the retailer takes both discounts, how much is paid to the retailer’s vendor?

The following relationships appear in the screen capture : The following relationships appear in the screen capture.

User Account

All Pages