27 Jul THE COST OF EACH TYPE OF CAPITAL DEPENDS ON
1. The cost of each type of capital depends on
A) risk-free cost of that type of funds. B) business risk of the firm. C) financial risk of the firm. D) All of the above. 2. The firm has a beta of 1.2. The market return equals 14% and the risk-free rate of return equals 6%. The estimated cost of common stock equity is
A) 6%. B) 7.2%. C) 14%. D) 15.6%. 3. Risk aversion is the behavior exhibited by managers who require greater than proportional ____________
A) increase in return, for a given decrease in risk. B) increase in return, for a given View complete question » 1. The cost of each type of capital depends on
A) risk-free cost of that type of funds. B) business risk of the firm. C) financial risk of the firm. D) All of the above. 2. The firm has a beta of 1.2. The market return equals 14% and the risk-free rate of return equals 6%. The estimated cost of common stock equity is
A) 6%. B) 7.2%. C) 14%. D) 15.6%. 3. Risk aversion is the behavior exhibited by managers who require greater than proportional ____________
A) increase in return, for a given decrease in risk. B) increase in return, for a given increase in risk. C) decrease in return, for a given increase in risk. D) decrease in return, for a given decrease in risk. 4. Generally, the order of cost, form the least expensive to the most expensive, for long-term capital of a corporation is
A) new common stock, retained earnings, preferred stock, long-term debt. B) common stock, preferred stock, long-term debt, short-term debt. C) preferred stock, retained earnings, common stock, new common stock. D) long-term debt, preferred stock, retained earnings, new common stock. 5. Greater risk aversion results in lower required returns for each level of risk, wheras a reduction in risk aversion would cause the required return for
each level of risk to increase.
A) True B) False 6. The cost of retained earnings is
A) zero. B) equal to the cost of a new issue of common stock. C) equal to the cost of common stock equity. D) irrelevant to the investment/financing decision. 7. A change in the risk-free rate would NOT be due to
A) an international trade embargo. B) a change in Federal Reserve policy. C) foreign competition in the firm’s product market area. D) none of the above 8. The preferred capital structure weights to be used in the weighted average cost of capital are
A) market weights. B) nominal weights. C) historic weights. D) target weights. 9. The investment opportunity schedule combined with the weighted marginal cost of capital indicates
A) those projects that a firm should select. B) those projects that will result in the highest cash flows. C) which projects are acceptable given the firm’s cost of capital. D) which combination of projects will fit within the firm’s capital budget. 10. The weighted average cost that reflects the interrelationship of financing decisions can be obtained by weighing the cost of each source of financing
by its target proportion in the firm’s capital structure.
A) True B) False 11. The beta coefficient is an index of the degree of movement of an asset’s return in response to a change in the risk-free asset return.
A) True B) False 12. The specific cost of each source of long-term financing is based on _____ and _____ costs.
A) before-tax; historical B) after-tax; historical C) before-tax; book value D) after-tax; current 13. An investment advisor has recommended a $50,000 portfolio containing assets R, J and K; $25,000 will be invested in R with an expected annual return of
12%; $10,000 will be invested in asset J, with an expected annual return of 18%; and $15,000 will be invested in asset K, with an expected annual
return of 8%. The expected annual return of this portfolio is
A) 12.67% B) 12.00% C) 10.00% D) unable to be determined from the information provi
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.