QUESTION 7

1. Although the money paid to investors is both the firm's cost and the investors return:

   	a.	a and c
   	b.	adjustments keep the costs of common and preferred equity equal but debt's cost is usually higher.
   	c.	certain adjustments prevent the effective cost and return from being the same.
   	d.	adjustments must be made to keep the effective cost and return equal.

2 points

QUESTION 8

1. According to finance theory, which of the following approaches can be used to estimate a firm's cost of equity?

   	a.	The capital-asset-pricing model approach
   	b.	The dividend growth approach
   	c.	The risk premium approach
   	d.	All of the above

2 points

QUESTION 9

1. Under the residual view, _____ only after all viable capital budgeting projects are funded.

   	a.	dividends are paid
   	b.	dividends are withheld
   	c.	dividends are reinvested
   	d.	stock dividends are paid