Cost of Capital is.... *

1 point

The average cost of making an investment

The cost a company needs to pay to repay its loan to its bank

The cost a company needs to pay to keep stakeholders happy

The average cost of raising capital

Cost of debt is usually lower than cost of preferred stock? *

1 point

True

False

Preferred shareholders receive preferential treatment from the company as they take the highest amount of risk? *

1 point

True

False

WACC includes *

1 point

rd, rps and rcs

rd and rcs

cost of common stock

depends on the sources from which the company has raised capital from

While calculating WACC, we incorporate the tax adjusted cost of debt. Why? *

1 point

Due to debt tax payment becomes higher

Debt is risky, hence government allows us to pay less tax

Due to interest the taxable income goes down, which in-turn lowers the tax payment

Which of the following techniques does not take into account the time value of money? *

1 point

NPV

IRR

Discounted Payback Period

Payback Period

All else remaining equal, if IRR is more than your required rate of return then *

1 point

You should accept the proposal

Reject the proposal

Depends on other factors

I will need to calculate modified IRR

If your required rate fo return (risk) is 0% then *

1 point

Your PV will be higher than FV

FV will be higher than PV

PV will be equal to FV

A manager can presume that the project will enhance shareholder wealth only if its NPV based on the risk-adjusted rate is *

1 point

Positive

Negative

Zero

Equal

The internal rate of return is defined as *

1 point

The discount rate that which causes the NPV to become positive

The discount rate that which causes the NPV to become zero

The discount rate that which causes the NPV to become negative