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Question
When preferred stock financing is also used by the firm; the after-tax weighted average cost of capital (WACC) is calculated as follows,
A. WACC = rD (D/V) + rP (P/V) + rE (E/V); (where V = D + P + E)
B. WACC = rD (1 - TC)(D/V) + rP (P/V) + rE (E/V); (where V = D + P + E)
C. WACC = rD (D/V) + (1 - TC)[rP (P/V) + rE (E/V)]; (where V = D + P + E)
D. None of the above
Answer
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Related questions
Q:
Suppose VS's stock price is currently $20. In the next six months it will either fall to $10 or rise to $30. What is the current value of a put option with an exercise price of $15? The six-month risk-free interest rate is 5% (periodic rate).
A. $5.00
B. $2.14
C. $0.86
D. $7.86
Q:
Suppose Ralph's stock price is currently $50. In the next six months it will either fall to $30 or rise to $80. What is the option delta of a call option with an exercise price of $50?
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C. 0.600
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Q:
A call option has an exercise price of $100. At the final exercise date, the stock price could be either $50 or $150. Which investment would combine to give the same payoff as the stock?
A. Lend PV of $50 and buy two calls
B. Lend PV of $50 and sell two calls
C. Borrow $50 and buy two calls
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A. $3.92
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Q:
The Black-Scholes OPM is dependent on which five parameters?
A. Stock price, exercise price, risk free rate, beta, and time to maturity
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D. Stock price, exercise price, risk free rate, variance and time to maturity
Q:
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23. If "u" equals the quantity (1 + upside change), then the quantity (1 + downside change) is equal to:
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B. -1/u
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A. Fall by more than the amount of the dividend
B. Fall exactly by the amount of the dividend
C. Fall by less than the amount of the dividend
D. Cannot be predicted
Q:
One key assumption of the Miller and Modigliani (MM) dividend irrelevance argument is that:
A. Future stock prices are certain
B. There are no capital gains taxes
C. All investments are risk-free
D. New shares are sold at a fair price
Q:
Generally, investors view the announcement of open-market repurchase of stocks as:
A. bad news and the stock price drops
B. good news and the stock price increases
C. a non-event and does not affect the stock prices
D. very good news and the stock price jumps up
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Generally, investors interpret the announcement of a decrease in dividends as:
A. bad news and the stock price drops
B. good news and the stock price increases
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Generally, investors interpret the announcement of an increase in dividends as:
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B. good news and the stock price increases
C. a non-event and does not affect the stock price
D. very bad news and the stock price plunges