Question
Which of these best explain why you would calculate a company's cost of capital and use it as the discount rate for evaluating a potential
Which of these best explain why you would calculate a company's cost of capital and use it as the discount rate for evaluating a potential investment?
a.This approach best reflects the risk profile of the company
b.It is required by the Securities and Exchange Commission
c.It is fun to write Excel formulas to calculate it
The price of ABC Corp. stock was $100 per share on Jan. 1, 2018 and $110 on Dec. 31, 2018. The total return for ABC stock was 10% in 2018. What was the dividend yield?"
a.10%
b.No dividends were paid
c.Need more information to answer this question
A $1,000 par value bond has a 5% fixed interest rate paid semi-annually. What amount will the bondholder receive as the first coupon payment?"
a.$50
b.$25
c.$100
Which of the three steps of evaluating an investment is typically the most challenging and requires the most skill?
a.Estimate the relevant cash flows
b.Calculate a figure of merit for the investment
c.Compare figure of merit to an acceptance criterion
If a company borrows too much money it can face financial distress costs. Which of these are an example of a distress cost?
a.Lost sales due to customer's concern about the finances of the company
b.Market signaling
c.The tax benefits of borrowing money
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