quiz ch 11-13 week 6

quiz ch 11-13 week 6 - Question 1 (1 point) Within the...

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Question 1  (1 point) Within the capital asset pricing model Question 1 options: A) the risk-free rate is usually higher than the return in the market. B) the higher the beta the lower the required rate of return. C) beta measures volatility of an individual stock relative to a stock market index. D) two of the above are true. Save Question 2  (1 point) For many firms, the cheapest and most important source of  equity capital  is in the form of  Question 2 options: A) debt. B) common stock. C) preferred stock. D) retained earnings. Save Question 3  (1 point) If a firm's bonds are currently yielding 8% in the marketplace, why would the firm's cost of debt be  lower? Question 3 options: A) Interest rates have changed. B) Additional debt can be issued more cheaply than the original debt. C) There should be no difference; cost of debt is the same as the bond's market yield.  D) Interest is tax-deductible. Save Question 4  (1 point)
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Why is the cost of debt normally lower than the cost of preferred stock? Question 4 options: A) preferred stock dividends are tax deductions. B) interest is tax deductible. C) preferred stock dividends must be paid before common stock dividends. D) common stock dividends are not tax deductible. Save Question 5  (1 point) Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 6.3 percent. With a tax  rate of 30 percent, what is the yield on the debt? Question 5 options: A) 4.41% B) 9.0% C) 1.89% D) 21% Save Question 6  (1 point) The coupon rate on a debt issue is 12%. If the yield to maturity on the debt is 9.33%, what is the  after-tax cost of debt in the weighted average cost of capital if the firm's tax rate is 34%? Question 6 options: A) 3.17% B) 4.08% C) 6.16% D) 7.92% Save Question 7  (1 point)
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Debreu Beverages has an optimal capital structure that is 50% common equity, 40% debt, and 10%  preferred stock. Debreu's pretax cost of equity is 12%. It's pretax cost of preferred equity is 7%, and  it's pretax cost of debt is also 7%. If the corporate tax rate is 35%, what is the weighted average cost  of capital.  Question 7 options: A) between 7% and 8%, B) between 8% and 9%. C) between 9% and 10%. D) between 10% and 12%. Save Question 8  (1 point) A firm's stock is selling for $78. The next annual dividend is expected to be $2.70. The growth rate is  9%. The flotation cost is $5.00. What is the cost of retained earnings? Question 8 options:
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This note was uploaded on 05/15/2011 for the course FINC 350-A taught by Professor Mason during the Spring '09 term at Columbia College.

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quiz ch 11-13 week 6 - Question 1 (1 point) Within the...

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