Quiz Ch 13 – Implications of WACC and Required Return on Equity
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
What can be inferred about a company if its WACC is lower than the required return on equity?
What can be inferred about a company if its WACC is lower than the required return on equity?
What is an implicit cost associated with increasing the proportion of debt in a company’s capital structure?
When calculating the present value of a business, at what rate should the firm’s free cash flows be discounted?
If a project can be partially financed with debt and the firm is subject to taxes, what will happen to the project’s acceptability if it initially had a positive NPV when financed entirely by equity?
True or false: The projected return on their bonds closely aligns with their yield to maturity in n the case of financially sound companies.
True or false: The amount of taxes paid will be affected when the company’s capital structure is changed but it will not alter the WACC.
True or false: The company’s cost of capital represents investor expectations for returns from its assets and operations.
True or false: The company’s cost of capital is the minimum required return for any project.
True or false: When computing a firm’s cost of capital, it should be based on the book weights of each financing source.
True or false: A decrease in the corporate tax rate will lead to the company using more debt for financing when everything else is constant.