If a companys tax rate increases but the ytm of its non-callable bonds remains the same, the after-tax cost of its debt will fall.
Answers
Explanation:
a. If a company's tax rate increases but the YTM of its non-callable bonds remains the same, the after-tax cost of its debt will fall.
b. All else equal, an increase in a company's stock price will increase its cost of new common equity, Kncs.
c. When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are tax deductible.
d. All else equal, an increase in a company's stock price will increase its cost of retained earnings, KRE.
e. Since the money is readily available, the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt.
Explanation:
Explanation:
a. If a company's tax rate increases but the YTM of its non-callable bonds remains the same, the after-tax cost of its debt will fall.
b. All else equal, an increase in a company's stock price will increase its cost of new common equity, Kncs.
c. When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are tax deductible.
d. All else equal, an increase in a company's stock price will increase its cost of retained earnings, KRE.
e. Since the money is readily available, the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt.