Terminal Value (TV) is:

Group of answer choices

deducted from the PV of FCF to arrive at valuation

needed only if FCF are not known beyond 10 years

the PV at the terminal year of cash flows beyond the terminal year of forecasting

Who has the highest Cost of Capital (WACC)?

[Capital structure and all else is equal]

Beta Bond Rating

Gabby 1.25 AAA

George 1.25 AA

Gina 0.75 AAA

Grant 0.75 AA

Group of answer choices

Gabby

George

Gina

Grant

Which D/E weights should be used in the WACC estimate if all info is available?

Group of answer choices

Weights based on stated Debt and Equity values in the Balance Sheet

Market Value Weights of outstanding stocks and bonds

Target or Optimal Weights based on market values.

market value weights actually used in financing the project

Detroit, Inc is currently an all-equity firm: D = 0%, E = 100%

Detroit is changing its capital structure to: D = 20%, E = 80%

What is the MOST LIKELY EFFECT on Detroit's WACC?

Group of answer choices

decreases

remains the same

increases

weights of debt has no effect on WACC