1. Which one (s) is (are) an external financing and has the flotation cost?
a. Retained earnings
c. Preferred stock
d. a & b
e. b & c -answer
Retained earnings are internal source of fund. Issuing bonds, preferred stocks, and common stocks are external source of fund, which have the floation cost.
2. The costs of financing from different sources are as follows:
IEF = 5%, EEF=6%, cost of debt before tax = 5%, tax rate=20%, the size of retained earnings=$30m. The capital structure is: We=40% and Wd=60%. Determine the WAMCC before and after the break point...
1. Which one (s) is (are) an external finan