Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

HELP OUT PLEASE!!!!! 77. The general rule for using the weighted average cost of capital (WACC) in capital budgeting decisions is accept all projects with:

HELP OUT PLEASE!!!!!image text in transcribed

77. The general rule for using the weighted average cost of capital (WACC) in capital budgeting decisions is accept all projects with: A. rates of return greater than or equal to the WACC. B. rates of return less than the WACC. C. rates of return equal to or less than the WACC. D. positive rates of return. 78. For many firms, the cheapest and most important source of equity capital is in the form of: A. debt. B. common stock. C. preferred stock. D. retained earnings. 79. The Security Market Line (SML): A. shows the relationship between a stock return and the market return but ignores risk. B. shows the relationship between risk and return. C. uses the AAA corporate bond rate for a riskless rate of return. D. shows the market risk relative to the industry risk. 80. In the equation Ki = Rf + Bi (Rm - Rf): A. beta (Bi) is the stock's measure of volatility relative to the company's historical volatility. B. Rm - Rf is the dollar discount on the market rate. C. Ki is the expected volatility of company j. D. Bi (Rm - Rf) is the expected return above the risk-free rate for the stock of company j. 81. If the investor desires less risk than the market, he or she: A. buys stocks with alphas of zero. B. buys stocks with betas less than 1.0. C. makes sure the risk-free rate is higher than the expected market return. D. buys stocks only when the slope of the security market line is on a 45 degree angle. 82. The capital asset pricing model: A. expresses a linear relationship between returns on individual stocks and the market over time. B. can be used to examine common stock returns but not the risk of the stock. C. is not very useful because it is unrealistically a linear model. D. is a linear model used to evaluate risk free rate. 83. A reduction in the willingness of investors to take on risk would have what effect on the Security Market Line (CAPM)? A. No effect B. Rotate the SML counter clockwise around the risk-free rate C. Rotate the SML clockwise around the risk-free rate D. Shift the SML upward, parallel to its previous location

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Million Air Exclusive Strategies For Pilots To Build Significant Wealth

Authors: Andy Garrison

1st Edition

1541383095, 978-1541383098

More Books

Students also viewed these Finance questions

Question

What is the high-low method? Discuss.

Answered: 1 week ago

Question

Explain the strength of acid and alkali solutions with examples

Answered: 1 week ago

Question

Introduce and define metals and nonmetals and explain with examples

Answered: 1 week ago