Question
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.
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