Quiz Ch 13 – Implications of Earning the WACC on Assets
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
What does it signify if a company earns its WACC on its assets?
What does it signify if a company earns its WACC on its assets?
What is the equivalent of the slope of the security market line?
True or false: The WACC is commonly adjusted upwards for riskier projects and downwards for safer projects when used as a discount rate.
True or false: Higher debt ratios may lead to increased returns demanded by debtholders.
True or false: Capital structure describes the combination of long-term debt and equity financing in a firm.
True or false: Preferred stock is NOT factored into the firm’s weighted average cost of capital (WACC).
True or false: CAPM and DDM can both determine the cost of equity financing.
True or false: A company’s capital structure encompasses the combination of its short-term financing.
True or false: The tax savings resulting from interest payments on a company’s bonds offset the cost of that interest.
What is the role of a firm’s WACC?