1. Which of the following is CORRECT?

IRR is the discount rate which forces the present value of cash flows to be equal to zero.

IRR is the discount rate which forces the net present value of cash flows to be equal to zero.

IRR is always lower than the WACC

IRR is always higher than WACC

None of the above statement is correct

2. A company wants to keep its WACC equal to 8.5 percent. The companys cost of equity(?) is 15.2 percent and its after-tax cost of debt is 4.8 percent. What debt-equity ratio is needed for the company to achieve its desired WACC?

1.81

1.67

1.53

1.99

2.25

3. Assuming that CAPM holds, what is the expected rate of return on a security if it has a 0.45 correlation with the market portfolio, a standard deviation of 40%? You are also provided with the following information: the standard deviation for the market portfolio is 22.75%, the market risk premium is 7% and the expected return on the market portfolio is 12%?

12%

10.96%

8.96%

12.45%

10.54%

4. If the debt-equity ratio of Ms Inc. is 0.74, then the proportion of debt and equity in its capital structure are:

26%;74%

74%;26%

43%;57%

57%;43%

Need to know the equity multiplier to answer this question