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MCQs

Total Questions : 53 | Page 5 of 6 pages
Question 41. The preferred dividend is divided by preferred stock price multiply by (1-floatation cost) is used to calculate
  1.    transaction cost of preferred stock
  2.    financing of preferred stock
  3.    weighted cost of capital
  4.    component cost of preferred stock
 Discuss Question
Answer: Option D. -> component cost of preferred stock
Answer: (d).component cost of preferred stock
Question 42. If the payout ratio is 0.45 then the retention ratio will be
  1.    0.55
  2.    1.45
  3.    1.82
  4.    0.45
 Discuss Question
Answer: Option A. -> 0.55
Answer: (a).0.55
Question 43. The retention ratio is 0.55 and the return on equity is 12.5% then the growth retention model would be
  1.    0.1195
  2.    0.06875
  3.    0.1305
  4.    0.2272
 Discuss Question
Answer: Option B. -> 0.06875
Answer: (b).0.06875
Question 44. The stock selling price is $65, expected dividend is $20 and cost of common stock is 42% then expected growth rate will be
  1.    0.1123 times
  2.    0.1123
  3.    11.23 times
  4.    11.23
 Discuss Question
Answer: Option B. -> 0.1123
Answer: (b).0.1123
Question 45. In weighted average cost of capital, the rising in interest rate leads to
  1.    increase in cost of debt
  2.    increase the capital structure
  3.    decrease in cost of debt
  4.    decrease the capital structure
 Discuss Question
Answer: Option A. -> increase in cost of debt
Answer: (a).increase in cost of debt
Question 46. In retention growth model, the percent of net income firms usually pay out as shareholders dividends, is classified as
  1.    payout ratio
  2.    payback ratio
  3.    growth retention ratio
  4.    present value of ratio
 Discuss Question
Answer: Option A. -> payout ratio
Answer: (a).payout ratio
Question 47. The cost of new debt or marginal debt is also classified as
  1.    historical rate
  2.    embedded rate
  3.    marginal rate
  4.    both a and b
 Discuss Question
Answer: Option D. -> both a and b
Answer: (d).both a and b
Question 48. The bond risk premium is 3% and the bond yield is 10.2% then the cost of common stock will be
  1.    0.034
  2.    0.132
  3.    0.072
  4.    0.306
 Discuss Question
Answer: Option B. -> 0.132
Answer: (b).0.132
Question 49. The historical growth rates, analysis forecasts and retention growth model are the approaches to estimate
  1.    present value of gain
  2.    growth rate
  3.    growth gain
  4.    discounted gain
 Discuss Question
Answer: Option B. -> growth rate
Answer: (b).growth rate
Question 50. In weighted average cost of capital, the cost of capital which is risk adjusted and developed for each category of
  1.    long-term projects
  2.    industry [industrial] projects
  3.    divisional projects
  4.    short-term projects
 Discuss Question
Answer: Option B. -> industry [industrial] projects
Answer: (b).industry [industrial] projects

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