Burnham Brothers, Inc. has no retained earnings since it has always paid out all of its...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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.
Expert Answer:
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:
Students also viewed these finance questions
-
Which of the following events would cause a movement along the demand curve for U.S. produced clothing, and which would cause a shift in the demand curve? a) The removal of quotas on the importation...
-
Which of the following events would normally cause revenue recognition, assuming use of accrual accounting and transfer of title on delivery? 1. Collection of cash from a customer 30 days after the...
-
Which of the following events would create a temporary tax difference with respect to either a deferred tax asset or deferred tax liability? a) Cash dividends received by a corporation from another...
-
Route Canal Shipping Company has the following schedule for aging of accounts receivable: AGE OF RECEIVABLES APRIL 30, 2001 a. Fill in column (4) for each month. b. If the firm had $1,440,000 in...
-
In most big cities, taxicab fares are fairly standardized, and they are regulated by local governments. For the sake of simplicity, assume that a cab driver works for a licensed taxicab company, and...
-
What is the difference between territorial and worldwide tax regimes?
-
The balance sheet of Oriental Rug Company at December 31, 2008, included the following stockholders' equity: During 2009, Oriental Rug completed the following selected transactions: Requirements 1....
-
Turnoverthe rate at which employees leave their jobsis notoriously high in the fast-food industry. According to the National Restaurant Association, more than half of all managers in limited-service...
-
Problem 14-3 (Algo) Straight-line and effective interest compared [LO14-2] On January 1, 2024, Reyes Recreational Products issued $100,000, 13%, four-year bonds. Interest is paid semiannually on June...
-
Congress recently enacted the Family Legal Services for the Poor Act. The Act establishes a Poverty Law Office in every state that is responsible for representing indigent clients in family law...
-
solve 7-3x = 12
-
Describe the graph of the function. f(x)=9x^(2)-x+1 parabola opening upward parabola opening downward Identify the vertex. Use a graphing utility to verify your results.
-
Suppose that all capital gains are taxed at a 21% rate, and that the dividend tax rate is 47%. Arbuckle Corp. is currently trading for $34, and is about to pay a $4 special dividend. a. Absent any...
-
Coronado Company, has these account balances at December 31, 2022. Notes payable ($62,000 due after 12/31/23) $103,000 Unearned service revenue 68,500 Other long-term debt ($90,000 due in 2023)...
-
A line passes through the point (1,4) and has slope m=-4. Find the x-intercept of the line. Give the x-coordinate of this point.
-
What are the benefits between the traditional and digital marketing channels when marketing a product? Why are traditional and digital channels used in marketing?
-
In the last team meeting, a decision to go international was agreed upon. As the Team Lead for marketing of Abena rice, you are expected to communicate (through a memo) any four (4) product-related...
-
Aztec Furnishings makes hand-crafted furniture for sale in its retail stores. The furniture maker has recently installed a new assembly process, including a new sander and polisher. With this new...
-
The total market value of the equity of Okefenokee Condos is $6 million, and the total value of its debt is $4 million. The treasurer estimates that the beta of the stock currently is 1.2 and that...
-
Pick the term from the following list that best fits each description: haircut; commercial paper; collateral; revolving line of credit; self-liquidating loan; LIBOR; syndicated loan. a. Interest rate...
-
a. It is 2016, you've just graduated college, and you are contemplating your lifetime budget. You think your general living expenses will average around $50,000 a year. For the next 8 years, you will...
-
Flow occurs in a rectangular channel of \(6 \mathrm{~m}\) width and has a specific energy of \(3 \mathrm{~m}\). Plot accurately the relation between depth and specific energy. Determine from the...
-
A rectangular channel carries a discharge of \(10 \mathrm{ft}^{3} / \mathrm{s}\) per foot of width. Determine the minimum specific energy possible for this flow. Compute the corresponding flow depth...
-
Flow in the channel of Problem 11.15 has a specific energy of \(4.5 \mathrm{ft}\). Compute the alternate depths for this specific energy. Data From Problem 11.15 11.15 A rectangular channel carries a...
Study smarter with the SolutionInn App