Questions from the practice exams in schweiser 1) I know to test for impairment of an asset is to compare book value to sum of undiscounted cash flows, but is there ever an instance where you use discounted cash flows for any test? 2) Question 69 of Exam 3 afternoon session, Which of the following statements about the component costs of capital is least likely correct? A) Cost of common equity is req’d rate of return on common stock B) Cost of preferred stock is preferred dividend divided by the preferred’s par value c) A-T cost of debt is based on the expected YTM on newly issued debt They say its B), any reason why? I thought that was the correct formula for K(pf)
It’s the dividend paid for the next period divided by par value plus the growth rate
Dividend / Market Price Not divide by par value.