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Question
Which of the following statements is CORRECT?a. All else equal, an increase in a company's stock price will increase its marginal cost of reinvested earnings (not newly issued stock), rs.
b. All else equal, an increase in a company's stock price will increase its marginal cost of new common equity, re.
c. Since the money is readily available, the after-tax cost of reinvested earnings (not newly issued stock) is usually much lower than the after-tax cost of debt.
d. If a company's tax rate increases but the YTM on its noncallable bonds remains the same, the after-tax cost of its debt will fall.
e. When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are deductible by the paying corporation.
Answer
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In a portfolio of three different stocks, which of the following could NOT be true?
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Which of the following is not correct for a firm with seasonal sales and customers who all pay promptly at the end of 30 days?
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