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Which of the following is false regarding Cost of Capital Costs of capital represents weighted average cost of the source of financing to the firm
Which of the following is false regarding Cost of Capital Costs of capital represents weighted average cost of the source of financing to the firm Costs of capital is normally discount rate used to analyze investments Cost of capital decreases as larger amounts of financing are utilized none of the above are false alternatives b and care false Suppose that interest rates (and, therefore, the firm's weighted average cost of capital) increase. This WOULD CHANGE the capital budgeting choices a firm would make if it uses payback method analysis. uses net present value analysis. uses internal rate of return analysis. uses profitability indices. alternatives b and care correct The yield to maturity is 12%, equity represents 55% of total assets and the tax rate is 30. What is the weighted after-tax cost of debt 12% 3.60% 8.40% 3.78% 4.62% The internal rate of return is the interest rate that equates the cash outflows of an investment with the Net Present Value. True False The return of the Standard & Poors was 11% and Treasury Bonds return is 4%. If the inflation premium is 3% and the Beta coefficient for Orange Stock is 1.25. Estimate the cost of equity. 10% 12.75% 16.5% 11% not enough data to answer the question If an investment project has a positive net present value, then the internal rate of return is less than the cost of capital. greater than the cost of capital. equal to the cost of capital. indeterminate, because it depends on the length of the project
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