题目内容

A companys operations analyst is evaluating a plant expansion project that is likely to be financed in part by issuing new common equity. Flotation costs are expected to be 4% of the amount of new equ

A. Ignore them,because flotation costs for common equity are likely to be nonmaterial.
B. Estimate the cost of equity capital based on a share price 4% less than the current price.
C. Determine the flotation cost attributable to this project and treat it as part of the projects initial cash outflow.

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A company is considering either an open market share repurchase or a cash dividend of an equal amount. Compared to the open market share repurchase, the cash dividend is most likely to:

A. Increase a shareholders wealth by a greater amount.
B. Increase a shareholders wealth by a lesser amount.
C. Have a relative impact that depends on the tax treatment of the two alternatives.

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Which of the following is most likely to increase share holders wealth？

A stock dividend.
B. A stock split.
C. A special dividend.

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If a companys after-tax borrowing rate is greater than the companys earning yield when the company repurchases stock with borrowed money, going forward, the earnings per share is most likely to:

A. increase.
B. decrease.
C. Remain unchanged.

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Business risk is the combination of:

A. Operating risk and financial risk.
B. Sales risk and financial risk.
C. Operating risk and sales risk.

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