all public and private information. Royal Petroleum Co.

1. all public and private information. 2. Royal Petroleum Co. can buy a piece of equipment that can be financed with debt at a cost of 9 percent (after-tax) and common equity at a cost of 16 percent. Assume debt and common equity each represent 50 percent of the firm’s capital structure. What is the weighted average cost of capital? between 4.5% and 8% more than 13% between 12 and 13% between 13 and 14% none of the above 3. An issue of common stock is expected to pay a dividend of $4.80 at the end of the year. Its growth rate is equal to eight percent. If the required rate of return is 13 percent, what is its current price? $103.68 $36.92 $96.00 none of these 4. Which of the following is not true regarding the cost of debt? Select all that apply: it is the return that the firm’s creditors demand on new borrowing. it is the interest rate that the firm pays on current borrowing. an appropriate method to compute the cost of debt is using the YTM of current bonds outstanding. it needs to be converted into an after-tax cost. none of the above are true. 5. Retained earnings has a cost associated with it because: new funds must be raised. there is an opportunity cost associated with stockholder funds. Ke> g flotation costs increase the cost of funding.