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The adjusted trial balance is -prepared prior to adjusting entries -prepared after financial statements -ensures there are no errors as long as debits equal to credits -used to prepare financial statements

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Which of the following statements is CORRECT?a. When calculating the cost of preferred stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation.b. Because of tax effects, an increase in the risk-free rate will have a greater effect on the after-tax cost of debt than on the cost of common stock.c. Higher flotation costs reduce investor returns, and that leads to a reduction in a company's WACC.d. When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible by the paying corporation.e. If a company's beta increases, this will increase the cost of equity used to calculate the WACC, but only if the company does not have enough retained earnings to take care of its equity financing and hence needs to issue new stock.

Which of the following would be a reasonable estimate for a company's before-tax cost of debt?a. The interest rate charged on a bank loan that the company received last year.b. The current yield on the company's existing bonds.c. The yield to maturity on the company's existing bonds.d. The coupon rate on the company's existing bonds.

Nachman Corporation forecasts that if all of its existing financial policies are adhered to, its proposed capital budget would be so large that it would have to issue new common stock. Since new stock has a higher cost than of retained earnings, Nachman would like to avoid issuing new stock. Which of the following actions would REDUCE its need to issue new common stock?a. Increase the proposed capital budget.b. Reduce the percentage of debt in the target capital structure.c. Increase the dividend payout ratio for the upcoming year.d. Reduce the amount of short term bank debt in order to increase the current ratio.e. Increase the percentage of debt in the target capital structure.

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