Question
Please state which are true with an explanation 1.Two companies having the same Net Debt/Equity ratio and offering the same average returns in different states
Please state which are true with an explanation
1.Two companies having the same Net Debt/Equity ratio and offering the same average returns in different states of the economy have the same beta
2.The CAPM formulae aims at computing the Cost of equity in a given company
3.Beta covers the idiosyncratic risk ?
4.Beta covers the market risk ?
5.The After-tax cost of debt is necessarily higher than the interest rate offered to the company by the bank
6.Beta emphasizes how sensitive the results of a given stock are compared to a well-diversified portfolio of shares
- The higher the risk, the higher the beta, the higher the WACC and the lower the present value of future cash flows
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