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8. Burnham Brothers, Inc. has no retained earnings since it has always paid out all of its earnings as dividends This same situation is expected
8. Burnham Brothers, Inc. has no retained earnings since it has always paid out all of its earnings as dividends This same situation is expected to persist in the future. The company uses CAPM to calculate its cost of equity and its target capital structure consists of common stock, preferred stock, and debt. Which of the following events would reduce its WACC? a. The flotation costs associated with issuing new common stock increase. b. The company's beta increases. c. Expected inflation increases. d. The market risk premium declines. Bloom and Company has no debt or preferred stock - it uses only equity capital. The overall corporate WACC is 12%, but Bloom consists of two equally-sized divisions: Division X, which has a cost of capital of 10%, and Division Y, which has a cost of capital of 14%. All of Division X's projects are equally risky, as are of Division Y's. However, the projects of Division X are less risky than those of Division Y. Which of the following projects should the firm accept? 9. a. b. c, d, A Division Y project with a 12% return. A Division X project with an 11% return. A Division X project with a 9% return. A Division Y project with an 11% return
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