1. The cost of capital is also known as the "hurdle rate".

True

False

2.

The constant dividend growth model and CAPM are two ways of estimating a firm's cost of equity.

True

False

3.

The cost of capital uses the amounts of total assets and debt as the capital structure weights.

True

False

4.

In deriving the WACC, market values are preferred over book values for the capital structure weights.

True

False

5.

Ceteris

paribus ,

projects with lower than average risk should be evaluated using a higher than average WACC.

True

False

6.

Ceteris paribus, a lower tax rate would result in a higher WACC.

True

False

7.

An unlevered firm is an all-equity firm.

True

False

8.

When estimating the cost of debt financing from bonds, a firm can use the

yieldminustominusmaturity

as the

beforeminustax

cost of debt.

True

False