True or false questions 1- Capital structure has no impact on WACC. 2- Usually cost of debt is more than cost of equity. 3- YTM ignores capital gains and capital loss. 4- There is no optimal capital structure .... Do you agree? 5- Decreasing in market interest rate will cause increasing in bond value. 6- Bond is selling at discount when coupon rate is less than market interest rate. 7- According to issuer of bond, bonds can be classified into subordinated and unsubordinated. 8- Euro bond is a type of foreign bonds. 9- Both common stock and preferred stock has the same growth rate. 10-Approximation method is more accurate than IRR in calculating YTM. 11- The main difference between the cost of common stock and the cost retained earnings is growth rate. 12- If expected EBIT is more than financial break-even point, its prefer to issuing bonds 13-Company's growth rate play an important role in calculating cost of bonds. 1 14- Market interest rate (discount rate) has no impact on the value of zero coupon rate. 15- According to Net Operating Income Approach (NOI approach) there is no optimal capital structure. Multiple choice questions: 1- ABC company is fully financed by equity, if the cost of debt is 8%, and cost of common stock is 18%, then the WACC of ABC company is: a. 8% b. 18% C. 13% d. 16% 2- If the EBT is $1000, tax rate is 40%, and number of shares is 100 shares, then the EPS is equal to: a. $6 b. $8 C. $10 d. $5 3- If cost of debts is 8%, debt weight is 40%, and cost of equity is 14%, then WACC is equal to: a. 12% b. 12.6% c. 10.6% d. 14.6% 4- If the par value of a bond is $1000, coupon rate is 10%, and market interest rate is 12%, the bond is selling at: a. Discount b. Premium C. Par value d. Market value 2