Chapter 10 Quiz - Chapter 10 Quiz Which of the following...

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Chapter 10 Quiz Which of the following would reduce a firm’s weighted average cost of capital (WACC)? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. The Federal Reserve tightens credit. 0.0% b . The firm expands into a risky new area. 100.0% c. The firm merges with another firm whose earnings are countercyclical to those of the first firm and to the stock market. 0.0% d . Investors become more risk averse. Score:1 / 1 Question 2 (1 point) Suppose a firm has been earning a return on equity (ROE) of 15 percent and retaining 30 percent of its earnings (i.e. its dividend payout ratio is 70 percent). If this situation is expected to continue indefinitely, what would be a reasonable estimate of g , the company’s future growth rate in dividends? Student response: 100.0% b. 4.5% Score:1 / 1 Question 3 (1 point) The Bettencourt Company’s currently outstanding bonds have a 14.8 percent coupon and a 10.7 percent yield to maturity. Bettencourt believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35 percent, what is Bettencourt’s
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This note was uploaded on 07/25/2011 for the course FINC 3334 taught by Professor Whitworth during the Winter '10 term at University of Houston.

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Chapter 10 Quiz - Chapter 10 Quiz Which of the following...

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