Question
19. The difference between the WACC formula and the WAFC formula is a. WACC uses preferred stock as the middle part. b. WAFC does not
19. The difference between the WACC formula and the WAFC formula is
a. WACC uses preferred stock as the middle part.
b. WAFC does not have the tax break on debt.
c. WACC uses smaller numbers than WAFC.
d. The portfolio weights on WACC have to total to one, but not on WAFC.
e. WAFC combines common and preferred, but WACC accounts for them separately.
20. Rank the following from first to last as guidelines for the Compromise Dividend Policy:
I. Avoid cutting the dividend
II. Maintain a target debt/equity ratio.
III. Avoid rejecting positive NPV projects in order to pay a dividend.
III, II, I
I, III, II
III, I, II
II, III, I
II, I, III
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