1. In capital budgeting, a company might use which of the following as its discount rate?
2. 1. Return on total assets
   2. After-tax cost of debt
   3. Times interest earned
   4. Weighted average cost of capital

1. Which causes a company to become leveraged?
2. 1. Issuing high amounts of common stock
   2. Making an initial public offer (IPO)
   3. Having high fixed costs
   4. Having high variable costs

1. Which of the following correctly describes how a firm's required return is determined?
2. 1. Using the going market rate for risk-free securities
   2. As the present value of the firm's debt and equity
   3. As the opportunity cost that its investors forego
   4. Using the average rate paid for debt and the company's share price

1. All of the following are true of the free cash flow (FCF) analysis EXCEPT
2. 1. it can also be calculated using the operating cash flow figure from the statement of cash flows less capital expenditures.
   2. it includes adjustments for the difference between the change in total current assets and total current liabilities.
   3. it must be a positive amount for it to be interpreted positively by investors.
   4. it is considered a better representation of the value of the firm to shareholders than operating cash flow.