1. Which one of the following factors is not considered in calculating the firms cost of equity?

1. risk free rate of return
2. beta
3. interest rate on corporate debt
4. expected return on equities
5. difference between expected return on stocks and the risk free rate of return

Which one of the following factors is not considered in calculating the firms cost of capital?

1. cost of equity
2. interest rate on debt
3. the firms marginal tax rate
4. book value of debt and equity
5. the firms target debt to equity ratio

A firms leveraged beta reflects all of the following except for

1. unleveraged beta
2. the firms debt
3. marginal tax rate
4. the firms cost of equity
5. the firms equity

1. Which of the following factors is excluded from the calculation of free cash flow to the firm?

1. Principal repayments
2. Operating income
3. Depreciation
4. The change in working capital
5. Gross plant and equipment spending

1. Which of the following is not true about the constant growth valuation model?

1. The firms free cash flow is assumed to be unchanged in perpetuity
2. The firms free cash flow is assumed to grow at a constant rate in perpetuity
3. Free cash flow is discounted by the difference between the appropriate discount rate and the expected growth rate of cash flow.
4. The constant growth model is sometimes referred to as the Gordon Growth Model.
5. If the analyst were using free cash flow to the firm, cash flow would be discounted by the firms cost of capital less the expected growth rate in cash flow.