5. The cost of new common stock True or False: The following statement accurately describes how rms mal-(e decisions related to issuing new common stock. If a firm needs additional capital from equity sources once its retained earnings breakpoint is reached, it will have to raise the capital by issuing new Common Stock. False: Firrns raise capital from retained earnings only when they cannot issue new common stock due to market conditions outside of their control. O True: Firrns will raise all the equity they can from retained earnings before issuing new common stock, because capital from retained earnings is cheaper than capital raised from issuing new common stock. White Lion Homebuilders is considering investing in a oneyear project that requires an initial investment of $450,000. To do so, it will have to issue new common stock and will incur a otation cost of 2.00%. At the end of the year, the project is expected to produce a cash inow of $550,000. The rate of return that white Lion expects to earn on its project (net of its flotation costs) is V (rounded to two decimal places). Alpha Moose Transporters has a current stock price of $33.35 per share, and is expected to pay a per-share dividend of $2.45 at the end of the year. The company's earnings' and dividends' growth rate are expected to grow at the constant rate of 9.40% into the foreseeable future. If Alpha Moose expects to incur otation costs of 3.750% of the value of its newly-raised eqUity funds, then the otationadjusted (net) cost of its new common stock (rounded to two decimal places) should be '7 . White Lion Homebuilders Co.'s addition to earnings for this year is expected to be $420,000. Its target capital structure consists of 50% debt, 5% preferred, and 45% equity. Determine White IJon Homebuilders's retained earnings breakpoint: 0 $980,000 0 $933,333 0 $886,666 0 $1,166,666 5. The cost of new common stock True or False: The following statement accurately describes how rms make decisions related to issuing new common stock. If a firm needs additional capital from equity sources once its retained earnings breakpoint is reached, it will have to raise the capital by issuing new common stock. False: Firms raise capital from retained earnings only when they cannot issue new common stock due to market conditions 0ut8ide of their control. 0 True: Firms will raise all the equity they can from retained earnings before issuing new common stock, because capital from retained earnings is cheaper than capital raised from issuing new common stock. White Lion Homebuilders is considering investing in a oneyear project that requires an initial investment of $450,000. To do so, it will have to issue new common stock and will incur a otation cost of 2.00%. At the end of the year, the project is expected to produce a cash inow of $550,000. The rate of return that White Lion expects to earn on its project (net of its flotation costs) is V (rounded to two decimal places). 13'830/0 ershare dividend of $2.45 at the end of the year. Alpha Moose Transporters has a current stock price of $33.35 per share, and is expecte- The company's earnings' and dividends' growth rate are expected to grow at the consta 19_33% 40% into the foreseeable future. If Alpha Moose expects to incur otation costs of 3.750% of the value of its newly-raised equity funds, tationadjusted (net) cost of its new common stock 12.890/ (rounded to two decimal places) should be V . o 17.85% White Lion Homebuilders Cofs addition to earnings for this year is expected to be $420, - - . get capital structure consists of 50% debt, 5% preferred, and 45% equity. Determine White Uon Homebuilders's retained earnings breakpoint: C) $980,000 O $933,333 C) $886,666 O $1,166,666 5. The cost of new common stock True or False: The following statement accurately describes how rms make decisions related to issuing new common stock. If a firm needs additional capital from equity sources once its retained earnings breakpoint is reached, it Will have to raise the capital by issuing new common stock. False: Firms raise capital from retained earnings only when they cannot issue new common stock due to market conditions outside of their control. 0 True: Firms will raise all the equity they can from retained earnings before issuing new common stock, because capital from retained earnings is cheaper than capital raised from issuing new common stock. White Lion Homepuilders is con5idering investing in a oneeyear project that requires an initial investment of $450,000. To do so, it will have to issue new common stock and will incur a otation cost of 2.00%. At the end of the year, the project is expected to produce a cash inow of $550,000. The rate of return that White Lion expects to eam on its project (net of its flotation costs) is v (rounded to two decimal places). Alpha Moose Transporters has a current stock price of $33.35 per share, and is expected to pay a perishare dividend of $2.45 at the end of the year. The company's earnings' and dividends' growth rate are expected to grow at the constant rate of 9.40% into the foreseeable future. If Alpha Moose expects to incur otation costs of 3.750% of the value of its newlyiraised eqUity funds, then the otationeadjusted (net) cost of its new common stock (rounded to two decimal places) should be V . 0 White Lion Homepuilders Co's addition to 16'75 A, this year is expected to be $420,000. Its target capital structure consists of 50% debt, 5% preferred, and 45% equity. Determine Whll17-03u/o ebuilders's retained earnings breakpoint: 0 $980,000 14.48% 0 $933,333 13-52% 0 $386,666 0 $1,166,566