Which of the following is generally TRUE about a firm's cost a) It is equal to the yield to maturity on the firm's bonds. b) It is greater than the cost of equity. c) It normally cannot be observed, directly or indirectly, in the marketplace. d) It is equal to the coupon rate on the firm's bonds. According to the Capita, Asset Pricing Model (CAPM), a stock with an actual return lies above the security market line (SML). a) has more systematic risk then the overall market b) has more risk than warranted based on the realized rate of return c) has less systematic risk than the overall market d) has yielded a higher return than expected for the level of systematic risk assumed The proposition that the value of the firm is independent of its capital structure is. a) The Capital Asset Pricing Model b) Modigliani and Miller (M&M) Proposition I without taxes and without costs c) Modigliani and Miller (M&M) Proposition II without taxes and without costs d) The Efficient Markets Hypothesis Which of the following correctly completes the following: M&M Proposition corporate taxes and without bankruptcy costs shows. a) the value of an unlevered firm exceeds the value of a levered firm by the value of the interest tax shield b) a levered firm can increase its value by reducing debt C) There is a linear relationship between the amount of debt in a levered firm value d) the value of a levered firm is equal to its aftertax earnings before interest (EBIT) discounted by the unlevered cost of capital According to Modigliani and Miller (M&M) Proposition n II without corporate without bankruptcy costs, a firm's cost of equity is a function of which of the factors? I. The unlevered cost of capital II. the firm's debt to equity ratio II. The firm's cost of debt a) only b) I and II only c) I and III only d) I, II and