36-

A firm's common stock is currently selling for $78 per share. Last year's dividend payment was $2.50 per share. The expected constant annual growth rate for the dividend payment is 8%. The flotation cost is $5.00 per share. The firm has decided to issue new common stock to meet its financing needs. What will be the per share cost of the firm's new common stock?

Select one:

a.

11.21%

b.

11.42%

c.

11.70%

d.

12.01%

38-

Why is the cost of debt usually lower than the cost of common stock? I. Interest on debt is tax deductible II. Stock dividends are not tax deductible III. Debt payments are discretionary

Select one:

A.

I only

B.

I and II only

C.

I and III only

D.

I, II, and III