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Question 39 3 pts World United stock currently plots on the security market line and has a beta of 1.04. Which one of the following
Question 39 3 pts World United stock currently plots on the security market line and has a beta of 1.04. Which one of the following will increase that stock's rate of return without affecting the risk level of the stock, all else constant? Decrease in the market rate of return Overpricing of the stock in the marketplace An increase in the risk-free rate Decrease in the security's beta Increase in the market risk-to-reward ratio Question 40 3 pts Which one of the following statements is accurate for a levered firm? The subjective approach totally ignores a firm's own WACC. An increase in the market risk premium will decrease a firm's WACC. A reduction in the risk level of a firm will tend to decrease the firm's WACC. A firm's WACC will decrease whenever the firm's tax rate decreases. WACC should be used as the required return for all proposed investments. Question 37 3 pts Cromwell's Interiors is considering a project that is equally as risky as the firm's current operations. The firm has a cost of equity of 15.4 percent and a pretax cost of debt of 8.9 percent. The debt-equity ratio is.46 and the tax rate is 34 percent. What is the cost of capital for this project? 12.40 percent 12.38 percent 11.62 percent 11.02 percent 11.97 percent D Question 38 3 pts Which one of the following statements is correct? Risk premiums are inversely related to the standard deviation of returns. The higher the expected rate of return, the wider the distribution of returns. Risks and expected return are inversely related. The risk-free rate of return has a risk premium of 1.0. The reward for bearing risk is called the standard deviation
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