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Author Question: Which of the following statements is correct? (Read 61 times)

bryantpr01

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on: Aug 7, 2023
Which of the following statements is correct?

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The bond-yield-plus-risk-premium approach to estimating the cost of common equity involves adding a risk premium to the interest rate on the company’s own long-term bonds. Empirical work suggests that the risk premium over a firm’s own bond yield has generally ranged from 5 to 10 percentage points, with recent values close to 5%.


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The WACC is calculated using a before-tax cost for debt equal to the interest rate that must be paid on new debt, along with the before-tax costs for common stock and for preferred stock if it is used.


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The WACC can change depending on the amount of funds a firm raises during a given year. Moreover, the WACC at each level of funds raised is a weighted average of the marginal costs of each capital component, with the weights based on the firm’s target capital structure. 


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A decrease in the risk-free rate is likely to increase the marginal costs of both debt and equity.

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by bryantpr01 on Aug 7, 2023

koswald

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Reply #1 on: Aug 7, 2023
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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bryantpr01

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Reply 2 on: Aug 7, 2023
Thanks for the timely response, appreciate it

Sarahjh

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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