PL Multiple Choicemack 1) United Merchant has a b 1. very high impedire expected on the market is 20 percent, the expected return on United will be a) 10 percent of the risk-free rate is 10 percent b) 20 percent more than 20 percent because of the Nigh tem-specife or unique elsk d) indeterminate unless you also know the risk-free rute 2) We have discussed the fact that the cost of equity for a fimmtaways be higher than its a) debtholders have a residual claim on the income and the sets of the firm b) interest on debt is tax deductible and thus creates tax savings c) interest and dividends are both tax deductible d) equity holders have a residual claim on the income and the assets of the firm 3) Which of the following would decrease the after tax NPV of a project? a) A shift from accelerated to straight line depreciation b) A decrease in the company tax rate c) An increase in the sale proceeds of the old machine d) A decrease in the hurdle rate associated with the project 4) In estimating the cost of debt, we argued that this cost is a combination of a risk-free rate and a risk premium. The risk premium for the cost of debt depends upon: a) the beta for the firm's bonds. b) the beta for the firm's stock. c) the risk premium for the market portfolio of stocks and bonds. d) the credit rating and default risk of the firm. 5) The importance of being able to measure systematic or market risk is that: a) it is necessary in order to measure the total risk of an asset b) the risk premium depends only on the company specific risk of an investment c) this is the only type of risk that is rewarded. d) the risk premium depends on both systematic and unsystematic risk. 2