1a. T/F: A business that operates in diverse lines of business should not use the corporate cost of capital to evaluate all projects.

1b.

Adding debt to a capital structure increases risk because _________

Group of answer choices

Debt service cannot be avoided

Debt is always risky

Interest expense involves a cash outflow

All of the above

1c. T/F: In simple terms, the expected return on a share of common stock can be expressed as the following equation: Expected return = Next expected dividend / Price today + Expected constant dividend growth rate.

1d.

A not-for-profit group practice is evaluating a new clinic proposal having a total cost of $10 million. The entire cost will be financed with a 6 percent long-term bank loan. Assuming the tax on profits is 22%, the after-tax cost of financing is 4.68%. The project is average risk and the practices corporate cost of capital is 8%. The discount rate that should be used to evaluate the new clinic project in decimal form rounded to the nearest .001 is __________

1e.

Which of the following is a reason why managers of not-for-profit firms do not have the same flexibility as investor-owned firms in making financing decisions?

Group of answer choices

They can't issue common stock.

They are not subject to taxation.

They can't issue tax-exempt debt.

None of these answers is a reason