Notice: Function _load_textdomain_just_in_time was called incorrectly. Translation loading for the wordpress-seo domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /home/clouawmm/public_html/wp-includes/functions.php on line 6114
Chapter 11 Discussion Questions - Cloud Essays

Cloud Essays

High Quality Essays

Browse Our Directory

Awaiting product image

Chapter 11 Discussion Questions

$7.50

11-1. Why do we use the overall cost of capital for investment decisions even when only one source of capital will be used (e.g., debt)?
11-2. How does the cost of a source of capital relate to the valuation concepts presented previously in Chapter 10?
11-3. In computing the cost of capital, do we use the historical costs of existing debt and equity or the current costs as determined in the market? Why?
11-4. Why is the cost of debt less than the cost of preferred stock if both securities are priced to yield 10 percent in the market?
11-5. What are the two sources of equity (ownership) capital for the firm?
11-6. Explain why retained earnings have an opportunity cost associated?
11-7. Why is the cost of retained earnings the equivalent of the firm’s own required rate of return on common stock (Ke)?
11-8. Why is the cost of issuing new common stock (Kn) higher than the cost of retained earnings (Ke)?
11-9. How are the weights determined to arrive at the optimal weighted average cost of capital?
11-10. Explain the traditional, U-shaped approach to the cost of capital.
11-11. It has often been said that if the company can’t earn a rate of return greater than the cost of capital it should not make investments. Explain.
11-12. What effect would inflation have on a company’s cost of capital? (Hint: Think about how inflation influences interest rates, stock prices, corporate profits, and growth.)
11-13. What is the concept of marginal cost of capital?
SKU: chapter-11-discussion-questions Category:
Share with others

Details

 

11-1. Why do we use the overall cost of capital for investment decisions even when only one source of capital will be used (e.g., debt)?
11-2. How does the cost of a source of capital relate to the valuation concepts presented previously in Chapter 10?
11-3. In computing the cost of capital, do we use the historical costs of existing debt and equity or the current costs as determined in the market? Why?
11-4. Why is the cost of debt less than the cost of preferred stock if both securities are priced to yield 10 percent in the market?
11-5. What are the two sources of equity (ownership) capital for the firm?

 

 

11-6. Explain why retained earnings have an opportunity cost associated?
11-7. Why is the cost of retained earnings the equivalent of the firm’s own required rate of return on common stock (Ke)?
11-8. Why is the cost of issuing new common stock (Kn) higher than the cost of retained earnings (Ke)?
11-9. How are the weights determined to arrive at the optimal weighted average cost of capital?
11-10. Explain the traditional, U-shaped approach to the cost of capital.

 

11-11. It has often been said that if the company can’t earn a rate of return greater than the cost of capital it should not make investments. Explain.
11-12. What effect would inflation have on a company’s cost of capital? (Hint: Think about how inflation influences interest rates, stock prices, corporate profits, and growth.)
11-13. What is the concept of marginal cost of capital?

 

 

Reviews

There are no reviews yet.

Only logged in customers who have purchased this product may leave a review.

Related products