Busıness Fınance II (ENG) — Ünite Sınavı

The marginal cost of capital (MCC) is the composite cost of the last dollar of new capital raised.

Which one of the following is a ratio measuring the profitability on equity capital and it is the division of the net income by the total common equity?

1. They are issued without a maturity.
2. The stockholder receives floating dividends that are deductible.
3. In some ways, they resemble to bonds, in others to common stocks.
4. Preferred dividends are paid out before the dividends to common stockholders.

Which of the above are the characteristics of preferred stocks?

XLM Corp. has a bond issue outstanding for which the yield-to-maturity is 8.45%. Analysts estimate a risk premium of 3.15% for the company's stock. What is the expected cost of equity of XLM according to the bond-yield-plus-risk-premium approach?

BB Corp. borrows $50,000 as a bank loan at an annual interest rate of 5%. The company pays 20% corporate tax rate. What is the after-tax rate of borrowing for BB Corp.?