Reference no: EM131356088
1. Corporate income taxes have the effect of
increasing the after-tax cost of debt for a firm.
decreasing the after-tax cost of debt for a firm.
decreasing the after-tax cost of equity for a firm.
increasing the after-tax cost of equity for a firm.
2. According to the Pecking Order Hypothesis, what is the sequence of sources of funds that a firm will typically access when obtaining capital for additional investments:
A) Debt issues, equity issue, retained earnings
B) Debt issues, retained earnings, equity use
C) equity issue, debt issue, retained earnings
D) It is irrelavent since WACC is independent of capital structure
E) Retained earnings, debt issue, and equity issue
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Corporate income taxes have effect-pecking order hypothesis
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: Micro Spinoffs, Inc., issued 20-year debt a year ago at par value with a coupon rate of 8%, paid annually. Today, the debt is selling at $1,100. The firm’s tax bracket is 20%. Micro Spinoffs also has preferred stock outstanding. The stock pays a divi..
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After-tax cost of debt financing
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