3. What do lease financing and hybrid financing in common?

1. They both lower the WACC for the firm.
2. Properly used they both will result in higher profits for the shareholders.
3. They both are more risky then equity.
4. They have nothing in common.

4. By enrolling the Widows-and-Orphans Clientele into a DRIP a firm is able to retain some of its current shareholders.

True/False

5. Which of the following statements about flotation costs is incorrect:

1. As a company issues more equity the flotation costs, as a percentage of the capital raised, decreases.
2. Due to flotation costs on equity the WACC₂is higher than WACC₁.
3. All capital components, i.e. debt, preferred stock, retained earnings, and equity, have flotation costs.
4. Flotation costs represents a payment to investment banks for their services.

6. A stock split has no impact on the value of the firm.

True/False