Question
I need assistance with this question. Thank you! 1. Which of the following is true about a firm with no debt financing? A. Return on
I need assistance with this question. Thank you!
1. Which of the following is true about a firm with no debt financing?
A. Return on equity = cost of debt
B. Cost of Equity = coupon rate
C. Cost of debt = WACC
D. Return on equity = WACC
2.The biggest pitfall of the subjective approach is that it assumes
A. that each project has the same amount of risk.
B. that the market risk premium is constant.
C. the same discount rate for all projects.
D. that each project fits nicely in a category.
3.What are the two risk components that determine a firm's cost of equity?
A. Management risk and financial structure risk
B. Financial structure risk and interest rate risk
C. Interest rate risk and the risk inherent in a firm's operations
D. The risk inherent in a firm's operations, plus financial structure risk
4.A higher debt level usually equates to a
A. larger tax shield but increased financial risk.
B. smaller tax shield and increased financial risk.
C. larger tax shield and decreased financial risk.
D. smaller tax shield and decreased financial risk.
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