Burnham Brothers, Inc. has no retained earnings since it has always paid out all of its...
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Burnham Brothers, Inc. has no retained earnings since it has always paid out all of its earnings as dividends This same situation is expected to persist in the future. The company uses CAPM to calculate its cost of equity and its target capital structure consists of common stock, preferred stock, and debt. Which of the following events would reduce its WACC? a. The flotation costs associated with issuing new common stock increase. b. The company's beta increases. C. Expected inflation increases. d. The market risk premium declines. Burnham Brothers, Inc. has no retained earnings since it has always paid out all of its earnings as dividends This same situation is expected to persist in the future. The company uses CAPM to calculate its cost of equity and its target capital structure consists of common stock, preferred stock, and debt. Which of the following events would reduce its WACC? a. The flotation costs associated with issuing new common stock increase. b. The company's beta increases. C. Expected inflation increases. d. The market risk premium declines.
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Answer rating: 100% (QA)
Solution dThe market risk premium declines WACC consists of cost of equity As per CAPM c... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-1259722615
9th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
Posted Date:
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