Which of the following sequences of financial assets are from lowest expected return to highest expected return from an investor's point of view (person who purchases the financial assets)? Preferred stocks, bonds, common stocks Bonds common stocks, preferred stocks Bonds, preferred stocks, common stocks a Preferred stocks.common stocks, bonds Common stocks, bonds, preferred stocks Question 37 Which of the following types of assets represents ownership interest in a corporation? Futures a. b. Bonds Stocks Od Options Other Question 38 For which of the following costs is it generally necessary to apply a tax adjustment to measure cost of capital? Cost of debt a O, Cost of preferred stock . Cost of common equity d. Cost of retained earnings None of them Question 39 Please select all statements that are CORRECT? If a company's tax rate increases but the YTM on its noncallable bonds remains the same, the after-tax cost of its debt will fall. Ob.lf a company's tax rate increases, then, all else equal, its welghted average cost of capital will decline clf raccost of debt) remains constant but T (tax rate) Increases. rd(1 - T) will decline (after tax cost of debt will decline). When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible by the paying corporation d. All of them Question 40 a. The overall (weighted average) cost of capital is composed of a weighted average of the cost of common equity and the cost of debt Ob the cost of common equity and the cost of preferred stock the cost of preferred stock and the cost of debt the cost of common equity, the cost of preferred stock, and the cost of debt d. e. the cost of debt Use the following information to compute the WACC for this public company. (Hint. Find the weights of equity and debt based on the total issuance Also do not forget which type of financing would qualify for tax deductibility, meaning for tax savings of (1-1) Equity financing $200,000 Cost of equity - 10% Debt financing $200,000 Cost of debts Tax rate -20% 7259 7.00 6.25 a 6 SOM 6.75% MacBook Air Question 42 2 points Save Answer Use the following information to compute the WACC for this public company [Hint Find the weights of equity and debt based on the total issuance. Also do not forget which type of financing would quality for tax deductibility, meaning for tax savings of (1-73 Equity financing $200,000 Cost of equity=104 Debt financing $200,000 Cost of debt es Tax rate increased from 20% to 40%. Please calculate WACC using T-404 7.25 7004 Od 6.50 525 Question 43 Why does the term (1 - t) appear in the WACC formula? The value of the company is taxable. a. Ob. Tax and inflation are related. Tax and risk are related. C. The interest paid on debt is tax deductible. d. All equity is taxed. e. Question 44 A manager can presume that the project will enhance shareholder wealth only if its NPV based on the risk adjusted rate is a positive b. negative Oc zero d equal Infinite Question 45 a The process of planning expenditures that will influence the operation of a firm over a number of years is called investment b. weighted average cost of capital (WACC) c capital budgeting a dividend valuation options Question 46 In capital budgeting, the positive net present value (NPV) results in a. negative economic value added Ob positive economic value added c. zero economic value added d. percent economic value added infinite economic value added Question 47 The net present value of a project is equal to Ca the present value of all net cash flows that result from the project. Ob the present value of all revenues minus the present value of all costs that result from the project. the present value of all future net cash flows that result from the project minus the initial investment required to start the project d all of them Oe none of them Question 48 Why are projects with negative net present values (NPVs) unacceptable to a firm? a. Returns lower than the cost of capital result in firm failure b. Returns with negative NPVs cause an equal profit ratio c. Returnswith negative NPVs are acceptable to a firm. d. Returns lower than the cost of capital result in higher profit ratios e. none of the above Question 49 2 points Save Anal You are the manager of Company is considering the purchase of a new printer Relevant information concerning the equipment follows. Assume that there is no tax savings from depreciation for simplicity What is the NPV of this project? Cost of printer 51,000 Expected revenue from sale of printed materiak 3500 annually for 2 years WACC 10% 513223 O De 52434 $500.00 31.500.00