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 the retained earnings breakpoint is retched, it will have to raise the capital by issuing new common stock. True: Firms 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. False: Firms raise capital from retained earnings only when they cannot issue new common stock due to market conditions outside of their control. Amba Co. Is considering a one-year project that requires an initial investment of $500,000; however, in raising this capital, Amba will incur an additional flotation cost of 2.0%. At the end of the year, the project is expected to produce a cash inflow of $550,000. Determine the rate of return that Amba expects to earn on the project after notation costs are taken into account. 7.8% 5.5% 7.0% 5.9% Amba Co. has a current stock price of $22.35 and is expected to pay a dividend of $2.45 at the end of next year. The company's growth rate is expected to remain constant at 9.4%. If flotation costs represent 5.0% of funds raised, what is the flotation-adjusted cost of new common stock? 20.4% 17.8% 20.9% 16.7% Amba Co.'s addition to earnings for this year is expected to be $420,000. Its target capital structure consists of 40% debt, 5% preferred, and 55% equity. Determine Amba's retained earnings breakpoint: $916, 363 $878, 181 $1, 050,000 $763, 636