The ________ is the firm’s desired optimal mix of debt and equity financing. cost of capital 2. target capital structure 3. book value 4. market…

1.The ________ is the firm’s desired optimal mix of debt and equity financing.   1. 1. cost of capital   2. 2. target capital structure   3. 3. book value   4. 4. market value2.The specific cost of each source of long-term financing is based on ________ and ________ costs.   1. 1. before-tax; historical   2. 2. before-tax; book value   3. 3. after-tax; current   4. 4. after-tax; historical3.The ________ from the sale of a security are the funds actually received from the sale after ________, or the total costs of issuing and selling the security, which have been subtracted from the total proceeds.   1. 1. gross proceeds; the flotation costs   2. 2. gross proceeds; the after-tax costs   3. 3. net proceeds; the flotation costs   4. 4. net proceeds; the after-tax costs 4.The cost of capital reflects the cost of funds   1. 1. over a short-run time period.   2. 2. at current book values.   3. 3. at a given point in time.   4. 4. over a long-run time period.5.A firm has common stock with a market price of $25 per share and an expected dividend of $2 per share at the end of the coming year. The growth rate in dividends has been 5 percent. The cost of the firm’s common stock equity is   1. 1. 5 percent.   2. 2. 10 percent.   3. 3. 13 percent.   4. 4. 8 percent.6.A project’s rate of return should be ________ than the weighted marginal cost of financing. The cumulative acceptance of projects ________ the weighted marginal cost of capital.   1. 1. greater; decreases   2. 2. less; decreases   3. 3. greater; increases   4. 4. less; increases7.Generally, the order of cost, from the least expensive to the most expensive, for long-term capital of a corporation is   1. 1. long-term debt, preferred stock, retained earnings, new common stock.   2. 2. preferred stock, retained earnings, common stock, new common stock.   3. 3. common stock, preferred stock, long-term debt, short-term debt.   4. 4. new common stock, retained earnings, preferred stock, long-term debt.8.The approximate before-tax cost of debt for a 10-year, 8 percent, $1,000 par value bond selling at $1,150 is   1. 1. 9 percent.   2. 2. 6 percent.   3. 3. 8.8 percent.   4. 4. 8.3 percent.

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