Question
Please help with the following 10 questions Question 1(1 point) A project's IRR is independent of the firm's cost of capital. In other words, a
Please help with the following 10 questions
Question 1(1 point)
A project's IRR is independent of the firm's cost of capital. In other words, a project's IRR does not change with a change in the firm's cost of capital.
Question 1 options:
a) Trueb) False
Question 2(1 point)
One minus the marginal tax rate multiplied by the average coupon rate on all outstanding debt equals the cost of debt.
Question 2 options:
a) Trueb) False
Question 3(1 point)
Which of the following statements is false?
Question 3 options:
a)
Other factors being constant, higher fixed costs mean a higher operating leverage.
b)
Corporate bonds and notes provide no voting rights.
c)
The cost of debt is the minimum acceptable rate of return to a firm on a project of average risk.
d)
a firm that increases operating leverage for a given quantity of output, increases itsbusiness risk
Question 4(1 point)
Assuming that NPVs based on the firm's cost of capital are equal, the NPV of a project whose cash flows accrue relatively rapidly will be more sensitive to changes in the discount rate than the NPV of a project whose cash flows come in later in its life.
Question 4 options:
a) Trueb) False
Question 5(1 point)
Which of the following is not potentially used in the weighted average cost of capital equation?
Question 5 options:
a)
cost of retained earnings
b)
weight of debt
c)
average corporate income tax rate
d)
marginal tax rate
Question 6(1 point)
The distance of the plot points from the characteristic line is a measure of the stock's diversifiable risk.
Question 6 options:
a) Trueb) False
Question 7(1 point)
Firm value is calculated by adding expected cash flow to the firm's cost of capital under each capital structure.
Question 7 options:
a) Trueb) False
Question 8(1 point)
Conflicts between two mutually exclusive projects occasionally occur, where the NPV method ranks one project higher but the IRR method ranks the other one first. Theoretically, such conflicts should be resolved in favor of the project with the higher positive NPV.
Question 8 options:
a) Trueb) False
Question 9(1 point)
If the returns of two firms are negatively correlated, then one of them must have a negative beta.
Question 9 options:
a) Trueb) False
Question 10(1 point)
If a firm's marginal tax rate is increased, this would, other things held constant, lower the cost of debt used to calculate its WACC.
Question 10 options:
a) Trueb) False
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