12. To value a company, which of the following is commonly used as a proxy for the risk-free rate in the CAPM?

a. The yield on a 20-year T-bond

b. The London Interbank Offered Rate

c. The 3-month T-bill rate

d. The Fed Funds Rate

e. The after-tax cost of debt

13. If a company has an enterprise value of $1,000 million and equity value of $1,150 million, what is the companys net debt?

a. $150 million

b. ($250) million

c. ($150) million

d. $250 million

14. If a company has $300 million of debt and $600 million of equity in its capital structure, what are its debt/total capitalization and debt/equity ratios?

a. 50.0% and 50.0%, respectively

b. 33.3% and 50.0%, respectively

c. 25.0% and 50.0%, respectively

d. 50.0% and 33.3%, respectively

15. For an action to affect the value of the firm, it has to

a. Affect current cash flows

b. Affect future growth

c. Affect the length of the high growth period

d. Affect the discount rate (cost of capital)

e. All of the above

16. What is the typical length of a DCF projection period?

a. 15 years

b. Perpetuity

c. 5 years

d. 20 years