In a recent presentation, Tom Brown made the following statements about the cost of capital...
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Accounting
In a recent presentation, Tom Brown made the following statements about the cost of capital components. Statement I: "One way to estimate the cost of new equity (or cost of external equity) is (D1/Stock price) plus growth rate." Statement II: "Cost of new preferred stock can be estimated as the dividend on the preferred stock divided by the preferred stock's par value." Statement III: "Cost of debt is based on the yield to maturity on newly issued debt." Statement IV: "Cost of retained earnings (or cost of internal equity) is the required rate of return on common stock.
Group of answer choices
I and II are false; III and IV are true.
II and III are false; I and IV are true.
All four statements are true.
II is false; I, III and IV are true.
I, II and III are false; IV is true.
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