5. The cost of new common stock True or False: The following statement accurately describes how firms 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. True: Fims 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 one-year project that requires an initial investment of $475,000. To do 50 , it will have to issue new common stock and will incur a flotation cost of 2,00%. At the end of the year, the project is expected to produce a cash infow of $595,000. The rate of return that white cion expects to earn on its project (net of its flotation costs) is (rounded to two decimal ptaces). 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 5.20% into the foreseeable future. If Alpha Moose expects to incur fotation costs of 5.00% of the value of its newly-raised equity funds, then the fotation-adjusted (net) cost of irs new common stoek. (rounded to two decimal places) should be False: Firms raise capital from retained earnings only when they cannot issut new common stock due to market conditons butside of their control. True: Firms will raise all the equity they can from retained earnings before issuing new common stock, because capital from rotained earnings is cheaper than capital raised from issuing new common stock. Whike Uon Homebuilders is considering imvesting in a one-year project that requires an initial investment of $475,000. To do so, it will hsve to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $595,000. The rate of return that White Lion expects to earn on its project (net of its fotation costs) is (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 5.20% into the foreseeable future. If Alpha Moose expects to incur flotation costs of 5.00% of the value of its newly-rased equity funds, then the fotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be White Lon Homebuilders Co's addition to earnings for this year is expected to be $420,000. 1ts target capital structure consists of 40% debt, 5% preferred, and 55% equity. Determine White Lien Homebulders's retained earnings breakpoint: $840,000 5687,272 $501,818 $763,636