Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The after-tax cost of bonds is (Select one): a. 0 b. higher than the pre-tax cost. c. less than the pre-tax cost. d. equals to

The after-tax cost of bonds is (Select one):

a. 0

b. higher than the pre-tax cost.

c. less than the pre-tax cost.

d. equals to the pre-tax cost.

If the equity multiplier is 1, then we can estimate the WACC with (Select one):

a. CAPM*(1-tax rate)

b. dividend discount model

c. YTM

d.YTM(1-tax rate)

The after-tax cost of the loan is (Select one):

a. 0

b. higher than the pre-tax cost.

c. less than the pre-tax cost.

d. equals to the pre-tax cost.

The return of a two-stock portfolio is (Select one):

a. higher, if the correlation of two stocks is high.

b. higher, if the correlation of two stocks is low.

c. independent from correlation.

d. the standard deviation multiplied by the expected return.

Which statement is TRUE regarding WACC? (Select one):

a. The cost of bonds increases the taxable income while the cost of equity does not

influence the taxable income,

b. The cost of bonds decreases the taxable income while the cost of equity increases the

taxable income.

c. Interest payments are reductions from taxable income while the cost of equity has no

impact on income.

d. The cost of bonds increases the taxable income while the cost of equity decreases the

taxable income.

If the return of a project is extremely high, then (Select one):

a. IRR might overestimate the actual return of the project.

b. NPV might overestimate the actual return of the project.

c. profitability index might overestimate the actual return of the project.

d. beta might overestimate the actual return of the project.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Governance Of Financial Management

Authors: John Carver, Miriam Carver

1st Edition

0470392541, 9780470392546

More Books

Students also viewed these Finance questions

Question

Discuss global cultural differences in GLOBE dimensions.

Answered: 1 week ago

Question

LO1 Discuss the objectives of human resource management.

Answered: 1 week ago