Answer these four-question correctly and with a brief explanation. Please read the all question carefully and give example where the example wanted.

1. How is cost of capital used to make financial decisions? Why do you think funds generated through retained earnings may have a cost? Give an example. 2. Briefly explain the tradeoff hypothesis and how it is related to the long run survival of a firm? One type of leverage affects both EBIT and EPS. The other type affects only EPS. Explain this statement. 3. One position expressed in the financial literature is that firms set their dividends as a residual after using income to support new investments. Using a suitable example justify your position. 4. As a stockholder, would you prefer to see your company declare 100% stock dividend or a 2-for-1 stock split. Assume that either position is feasible. Using a hypothetical example, show the effects of stock splits and stock dividends on balance sheets