Answer:
The answer is D. All of the above
Explanation:
The Capital structure of most companies comprise equity, debt and/or preference shares. All these that made up capital structure has cost or let's say return. We have cost of capital, cost of debt, cost of preference shares.
Therefore, weighted average cost of capital is average of the cost of each financing component(cost of capital, cost of debt and cost of preference shares), weighted by the proportion of each component
All the options relates to the weighted average cost of capital(WACC).
Answer:
David is a stockholder and Max is a bondholder.
Explanation:
Since David will share the net profit as for 1/3 rd share, he will be deemed as a shareholder as there is no promise to pay back the amount he lend although there is share in profits.
Also in case of Max he had paid $5,000, on which interest will be paid, basically interest is treated as an expense and a compulsion to incur even in case of loss.
Accordingly Max posses to hold a bond with interest of 7% on face value of $5,000. On the other hand David holds equity share worth of $10,000 and the share is 1/3 rd in profits.
Answer and Explanation:
Earnings per Share, EPS = <u>Net Income dividend of preferred stock</u>
Number of stock outstanding
EPS depends on the earnings and its dilution due to increase in preferred stock also it depends on the net income earned
When EPS is higher than analyst prediction,
this may be due to increase in the net income
or
payback of common stock or preferred stock
thereby leading to reduction in the number of stock outstanding
When EPS is lower than analyst prediction
this would be due to reduction in the net income
or
increase of stock or preferred stock due to fresh issue
Insurance against issues that could lead to reduction on income and inrease in the activities that will lead to net income increase can help meet or surpass analyst prediction