Multiple choice. Please show work.
Which of the following statements is CORRECT? The component cos of preferred stock is rp (1 - T). This follows because preferred stock dividends are treated as fixed charges and as such they can be deducted by the issuer for tax purposes. A cost should be assigned to retained earnings due to the opportunity cost principle, which refers to the fact that the firm's stockholders would themselves expect to cam a return on earnings that were paid out rather than retained and reinvested. No cost should be assigned to retained earnings because the firm does not have to pay anything to raise them. They are generated as cash flows by operating assets that were raised in the past, hence they are "free". Suppose that a firm has been losing money and thus is not paying taxes and this situation is expected to persist into the foreseeable future. In this the firm's before-tax and after-costs of debt for purposes of calculating the WACC will both be equal to the interest rate on the firm's currently outstanding debt, provided that debt was issued during the past five years. If a firm has enough retained earnings to fund its capital budget for the coming year, then there is no need to estimate either a cost of equity of a WACC. Ensaimada Mallorquina y Compania holds the following portfolio: EM plans to sell Stock A, and replace it with Stock E. which has a beta of 0.97. By how much will the portfolio beta change? -0.172 -0.205 -0.182 -0.129 -0.146 Chocolate, Chimes y Bunuelos Cia, a division of Merienda Cena. forecasts the free cash flows (in millions) shown below. The weighted average cost of capital is l3.0%, and FCFs are expected to continue grow at a 5.0% rate after Year 3. What is the farm's total enterprise value, in million? dollar675.02 dollar453.90 dollar692.48 dollar482,99 dollar581.92