1. Which of the following is an advantage of the net present value (NPV) technique for evaluating cash flows?
A. Ease of understanding. B. 100% accurate. C. Discount rate adjusts for risk. D. Easy comparison of separate NPV projects.
2. Bleakly Enterprises has a capital structure of 45 percent common stock, 5 percent preferred stock, and 50 percent debt. The flotation costs are 4.5 percent for debt, 7 percent for preferred stock, and 9.5 percent for common stock. The corporate tax rate is 34 percent. What is the weighted average flotation cost?
5.83 percent
6.20 percent
6.42 percent
6.67 percent
6.88 percent