79. Market values are often used in computing the weighted average cost of capital becausea) this is

79. Market values are often used in computing the weighted average cost of capital becausea) this is the simplest way to do the calculation.b) this is consistent with the goal of maximizing shareholder value.c) this is required in the U.S. by the Securities and Exchange Commission.d) this is a very common mistake.80. Rank in ascending order (i.e., 1 = lowest, while 3 = highest) the likely after-tax component costs of a Company’s long-term financing.a) 1 = bonds; 2 = common stock; 3 = preferred stock.b) 1 = bonds; 2 = preferred stock; 3 = common stock.c) 1 = common stock; 2 = preferred stock; 3 = bonds.d) 1 = preferred stock; 2 = common stock; 3 = bonds.81. Lei-Feng, Inc.’s $100 par value preferred stock just paid its $10 per share annual dividend. The preferred stock has a current market price of $96 a share. The firm’s marginal tax rate (combined federal and state) is 40 percent, and the firm plans to maintain its current capital structure relationship into the future. The component cost of preferred stock to Lei-Feng, Inc. would be closest to .a) 6 percent b) 6.25 percentc) 10 percentd) 10.4 percent

 

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