Quiz Ch 12 – Determining Factors of Investment Cost of Capital
Essentials of Corporate Finance
Ross, Westerfield, and Jordan
10th Edition
What is the main factor influencing the cost of capital for an investment?
What is the main factor influencing the cost of capital for an investment?
When computing the firm’s weighted average cost of capital (WACC), which rate should the firm use as the cost of equity, given a return on equity of 12.4 percent according to the dividend growth model, a return of 18.7 percent according to the capital asset pricing model, and a market rate of return of 13.5 percent?
Which option is used to calculate the pretax cost of debt?
Which approach is Kate, the CFO of a major firm, applying when assigning discount rates to projects based on their risk levels?
Considering all else constant, what are the effects of an increase in a firm’s cost of debt?
Assuming all other factors remain constant, which one of the following will result in a decrease in the weighted average cost of capital (WACC) for a risky, levered firm?
Which factor decreases the aftertax cost of debt for a firm?
Considering all else held constant, under which condition will the cost of equity for a firm with a beta of 1.2 increase?
Which factor most likely contributes the most to the lower rate requirement for Kurt’s division?
Which will lead to an increase in a firm’s weighted average cost of capital (WACC) based on the given information?