Winecellars inc. currently has a weighted average cost of capital of 12%. winecellars has been growing rapidly over the past several years, selling common stock in each year to finance its growth. however, due to difficult economic times this year, winecellars decides to cut its dividend and increase its retained earnings so that the common equity portion of its capital structure will include only retained earnings and no new common stock will be sold. winecellars' weighted average cost of capital this year should be a) zero, since no new stock will be sold. b) less than 12%.c) equal to 12%.d) greater than 12%.

Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. in this case, the country that produces jeans will produce 32 million pairs per month, and the country that produces corn will produce 32 million bushels per month.

If a company’s employees are angry about their work, a visiting auditor may also become agitated, illustrating the power of

If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. there are two approaches to use to account for flotation costs. the first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. because the investment cost is increased, the project's expected return is reduced so it may not meet the firm's hurdle rate for acceptance of the project. the second approach involves adjusting the cost of common equity as follows: . the difference between the flotation-adjusted cost of equity and the cost of equity calculated without the flotation adjustment represents the flotation cost adjustment. quantitative problem: barton industries expects next year's annual dividend, d1, to be $1.90 and it expects dividends to grow at a constant rate g = 4.3%. the firm's current common stock price, p0, is $22.00. if it needs to issue new common stock, the firm will encounter a 6% flotation cost, f. assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%. what is the flotation cost adjustment that must be added to its cost of retaine