Please help, I will thumb up for your support! ( There are other similar type questions like this that I posted eariler)

1. www.chegg.com/homework-help/questions-and-answers/please-help-thumb-support-question-7-b-investor-portfolio-two-assets-b-details-shown-table-q88181576

2. www.chegg.com/homework-help/questions-and-answers/please-help-thumb-support-question-12-company-conducts-following-capital-payout-raising-po-q88181298

3. www.chegg.com/homework-help/questions-and-answers/question-9-firm-debt-equity-ratio-1-1-firm-s-debt-beta-03-five-year-government-bonds-yield-q88180958

4. www.chegg.com/homework-help/questions-and-answers/please-help-thumb-support-similar-type-question-1-wwwcheggcom-homework-help-questions-answ-q88182404

Question 5

Which statement about capital structure is the most correct?

a. Because the cost of debt is cheaper than the cost of equity, a company should use as much debt as possible to finance their projects

b. Lenders rank ahead of shareholders when the company goes bankrupt. This increased risk for shareholders means the cost of equity is lower than the cost of debt.

c. A company in a risky industry with volatile cash flows will usually choose to take less debt than a company in a stable industry.

d. The more the company borrows, the higher will be its tax shield, therefore a company will always prefer to issue debt than equity.

e. The more the company borrows, the lower will be the after-tax WACC. This increases the present value of the firm free cash flows which represents the value of the levered firm. Therefore, a firm should always seek to borrow as much debt as possible.

Question 3

You discover an investment costing $5,000 which has an expected total return of 14% pa, but a required return of only 10% pa. Of the 14% pa total expected return, the capital return is expected to be 9% pa. Assume that the required return of 10% remains constant, the dividends can only be re-invested at 10% pa and all returns are given as effective annual rates.

Which of the following statements is NOT correct?

a. When plotted on the Security Market Line, the investment would have a positive alpha.

b. The expected dividend return is 5%

c. The investments price at time t=20 would be $28,022.05

d. You would use a discount rate of 10% to find the NPV of this investment

e. The investment is currently overpriced