15-25

15. Valuation of financial assets requires knowledge of A company valuation. 8. an appropriate discount rate C. past asset performance D. future cash flows and an appropriate discount rate. A. changes at a constant level for each percentage change of yield to maturity B. is an inverse relationship. C. is a linear relationship. 16. The relationship between a bond's sales price and the yield to maturity D. changes at a constant level for each percentage change of yield to maturity and is an inverse relationship. 17. There may be a change in the marginal cost of capital curve when A. the tax rate charged to investors changes. B. the firm has exhausted its supply of retained earnings C. the firm is limited in the amount of depreciation it can take. D. the tax rate charged to investors changes and the firm has exhausted its supply of retained earnings 18. The coupon rate on a debt issue is 6%. Ifthe yield to maturity on the debt is99, what is the after-tax cost of debt in the weighted average cost of capital if the firm's tax rate is 34%? A.396% B. 4.08% C. 5.94% D. 7.92% 19. Using the constant dividend growth model for common stock, if the market price of stock (PO) goes up, A. the assumed cost goes up. B. the assumed cost goes down. C, the assumed cost remains unchanged. D. Further information is needed to answer the question 20. Although debs inng is usually the cheapest component of capital, t annot be used in excess because A. interest rates may change. B. the firm's stock price will increase and raise the cost of equity f C. the financial risk of the firm may increase and thus drive up the cost of all sources of financing. D. underwriting costs may change. financing