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Which of the following causes a firm's cost of capital (WACC) to differ from an investor's required rate of return on the company's common stock?
Which of the following causes a firm's cost of capital (WACC) to differ from an investor's required rate of return on the company's common stock?
A) the fact that the risk-free rate of interest has increased
B) the incurrence of flotation costs when new securities are issued
C) The market risk premium exceeds 12%.
D) None of the above — the WACC and required return are the same.
A) the fact that the risk-free rate of interest has increased
B) the incurrence of flotation costs when new securities are issued
C) The market risk premium exceeds 12%.
D) None of the above — the WACC and required return are the same.
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Answer i The answer should be B the incurrence of ...
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Equity Asset Valuation
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen
2nd Edition
470571439, 470571438, 9781118364123 , 978-0470571439
