14Part A

part B

Which of the following best describes trends in types of capital structure that firms have used in the last generation? O In recent years it has actually become much more common for publicly traded corporations to buy back their own stock than to issue new stock. In recent years preferred stock usage has exploded in frequency such that it rivals levels of corporate borrowing nowadays. In recent years we have seen many more projects financed by raising external funds of all kinds than by relying on internal funding O In recent years bond yields have fluctuated so rapidly that use of debt as a source of corporate funding has fallen greatly due to the fear of uncertainty surrounding rates. The concept of opportunity costs, as it pertains to share holders, can best be summarized by noting that stockholders are missing out on the opportunity to fund low-NPV projects when their opportunity costs are reinvested O stockholders are missing out on the opportunity to fund high-NPV projects when their opportunity costs are reinvested stockholders are foregoing dividend payments that they could receive from the firm, or firms of similar risk when the firm elects to reinvest its earnings stockholders are foregoing interest payments that they could receive from the firm, or firms of similar risk when the firm elects to reinvest its earnings