Finance Assignment | Get paper Help
1. The cost of equity in the context of the WACC____
a.Is the share price at issue
b. Is the output of the CAPM
c.Must be after-tax
d.Present value of dividends
2.All else being equal, if a company were to see its beta increase, the cost of capital be expected to___
a.None of the choices
b. Increase
3. When a company is evaluating a new investment project, the discount rate should be the___
a. long term company borrowing rate
b. The weighted average cost of capital
c. Higher than the risk premium
d. The required return on equity
4. Debt in the context of the WACC____
a. Includes only long term debt
b. Includes accounts payable
c. Excludes leases
d. All interest bearing debt
5. Black company has the following data. Determine the WACC. Round to the nearest 0.1%
required return on equity = 12.0%
cost of debt = 5.0%
tax rate = 20%
D/(D+E) = 40.0%
a.14%
b.8.8%
c.5.4%
d.7.6%
6. The main difference between the cost of capital and the cost of equity is that the former___
a.only covers low risk investments
b. Includes cost of debt
c.excludes shares
d.includes taxes on capital
7.The value of the firm is the present value ____
a.shares traded on stock markets
b.of dividends
c.of all cash generated by assets
d. of assets less debt
8.All else being equal, if a company were to take on more long-term loans, the cost of capital would be expected to ___
a.decrease
b.Increase
c.be more uncertain
d. None of the choices
9. pink company has the following data. Determine the WACC. Round to the nearest 0.1%
cost of equity = 10%
cost of debt = 2.0%
tax rate = 30%
D/(D+E)= 60%
a.10%
b.4.8
c.4.4
d.6.2%
10. When an investor wants to determine the present value of a share, it is best to use the ___
a. Long term company borrowing rate
b. Weighted average cost of capital
c. Discounted cash flow of assets
d. Required return on equity
11. All else being equal if the market risk premium were to increase, the cost of capital for the company would be expected to___
a.Decrease
b.Increase
c. None of the choices
d. Be more uncertain
12. The cost of debt in the context of WACC___
a.does not include value added taxes
b.Includes taxes
c.is after tax
d. is tax free
c. Decrease
d.be more incertain
