6 (2 points) Which of the following statements is FALSE? Question 6 options: A) The firm's weighted average cost of capital, denoted rwacc, is the cost of capital that reflects the risk of the overall business, which is the combined risk of the firm's equity and debt. B) Intuitively, the difference between the discounted free cash flow model and the dividend-discount model is that in the divided-discount model the firm's cash and debt are included indirectly through the effect of interest income and expenses on earnings in the dividend-discount model. C) We interpret rwacc as the expected return the firm must pay to investors to compensate them for the risk of holding the firm's debt and equity together. D) When using the discounted free cash flow model we should use the firm's equity cost of capital. Save Question 7 (2 points) On a particular day, a mining company reveals that, due to new extraction technology, the extractable yield from several of its nickel/lead mines has risen by 15%. Which of the following is the LEAST likely consequence of such an announcement? Question 7 options: A) The price of the stock would rise due to the pressure to buy B) Investors would determine that the estimates of the firm's value on the date prior to the announcement were too high. C) Investors would increase their forecast of future cash flows in that firm. D) Investors would revise their estimates of the net present value (NPV) of the firm. Save Question 8 (2 points) Which of the following statements is FALSE? Question 8 options: A) The most common valuation multiple is the price-earnings ratio. B) You should be willing to pay proportionally more for a stock with lower current earnings. C) A firm's price-earnings ratio is equal to the share price divided by its earnings per share. D) The intuition behind the use of the price-earnings ratio is that when you buy a stock, you are in a sense buying the rights to the firm's future earnings, and differences in the scale of firms' earnings are likely to persist. Save Question 9 (2 points) General Industries is expected to generate $22 million, $26 million, $29 million, $30 million and $32 million in free cash flows over the next five years, after which free cash flows are expected to grow at a rate of 3% per year. If the weighted average cost of capital is 8% and General Industries has cash of $10 million, debt of $40 million, and 80 million shares outstanding, what is General Industries' expected current share price? Question 9 options: A) $6.60 B) $6.72 C) $7.67 D) $9.48 Save Question 10 (2 points) Which of the following statements is FALSE? Question 10 options: A) The more cash the firm uses to repurchase shares, the less it has available to pay dividends. B) Free cash flow measures the cash generated by the firm after payments to debt or equity holders are considered. C) We estimate a firm's current enterprise value by computing the present value (PV) of the firm's free cash flow. D) We can interpret the enterprise value as the net cost of acquiring the firm's equity, taking its cash, and paying off all debts. Save