Read each of the following statements, and indicate whether each statement is true or false Statement True False Firms raise capital from retained earnings only when they cannot issue new common stock due to market conditions outside of their control In general, firms are reluctant to issue new common stock to raise additional financial capital due to the magnitude of the flotation costs and the negative signals sent to the marketplace The flotation costs associated with the sale of debt securities are greater than those associated with new common stock issues Consider the case of Alpha Moose Transporters Alpha Moose Transporters has a current stock price of $42 per share, and is expected to pay a per share dividend of $4 50 at the end of next year The companys earnings and dividends growth rate are expected to grow at a constant rate of 4 20 into the foreseeable future If Sunny Day expects to incur flotation costs of 3 70 of the value of its newly raised equity funds, then the flotation adjusted (net) cost of its new common stock (rounded to two decimal places) should be (13 80 , 15 33 , 14 56 , 12 26 )

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Posted on Jul 10, 2024

Read each of the following statements, and indicate whether each statement is true or false. Statement True False Firms raise capital from retained earnings only

Read each of the following statements, and indicate whether each statement is true or false.

Statement	True	False
Firms raise capital from retained earnings only when they cannot issue new common stock due to market conditions outside of their control.
In general, firms are reluctant to issue new common stock to raise additional financial capital due to the magnitude of the flotation costs and the negative signals sent to the marketplace.
The flotation costs associated with the sale of debt securities are greater than those associated with new common stock issues.

Consider the case of Alpha Moose Transporters:

Alpha Moose Transporters has a current stock price of $42 per share, and is expected to pay a per-share dividend of $4.50 at the end of next year. The companys earnings and dividends growth rate are expected to grow at a constant rate of 4.20% into the foreseeable future. If Sunny Day expects to incur flotation costs of 3.70% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be _______(13.80%, 15.33%, 14.56%, 12.26%).