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Assignment Questions: (Marks: 05) Q1. American Exploration, Inc., a natural gas producer, is trying to decide whether to revise its target capital structure. Currently it targets a 50-50 mix of debt and equity, but it is considering a target capital structure with 70% debt. American Exploration currently has 6% after-tax cost of debt and a 12% cost of common stock. The company does not have any preferred stock outstanding. (2 Marks)- Ch 13 Q2. Why is a preference share called a hybrid security? Do you agree that it combines the worst features of ordinary shares and bonds? (1 Mark)- Ch 15 Q3. What is financial distress? How does it affect the value of firm? (1 Mark)- Ch 16 Q4. Explain the nature of the factors which influence the dividend policy of a firm. (1 Mark)- Ch 17