Question 1 New common stock is more expensive than Ke: A. to compensate for ris

Question 1 New common stock is more expensive than Ke: A. to compensate for risk. B. to compensate for more dividends. C. to compensate for expansionary problems. D. to cover distribution costs. Question 2 In computing the cost of common equity if D1 goes downward and Po goes up Ke will: A. go up. B. go down. C. stay the same. D. slowly increase. Question 3 In determining the cost of retained earnings: A. the dividend valuation model is inappropriate. B. flotation costs are included. C. growth is not considered. D. the capital asset pricing model can be used. Question 4 Within the capital asset pricing model: A. the risk-free rate is usually higher than the return in the market. B. the higher the beta the lower the required rate of return. C. beta measures the volatility of an individual stock relative to a stock market index. D. None of the above

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