Question 4 5 5 pts which of the following statements

This preview shows page 3 - 7 out of 14 pages.

Question 45 / 5 ptsWhich of the following statements is correct?The WACC as used in capital budgeting is an estimate of a company’s before-tax cost of capitalThe percentage flotation cost associated with issuing new common equity istypically smaller than the flotation cost for new debtThe WACC as used in capital budgeting is an estimate of the cost of all thecapital a company has raised to acquire its assetsCorrect!There is an “opportunity cost” associated with using retained earnings, hencethey are not “free”
The WACC as used in capital budgeting would be simply the after-tax cost ofdebt if the firm plans to use only debt to finance its capital budget during thecoming yearQuestion 55 / 5 ptsWhich of the following statements is correct?
Question 60 / 5 ptsWhich of the following statements is correct? Assume that the project beingconsidered has normal cash flows, with one outflow followed by a series ofinflows.You Answered
A project’s regular IRR is found by compounding the cash inflows at theWACC to find the terminal value (TV), then discounting this TV at the WACCA project’s regular IRR is found by discounting the cash inflows at the WACCto find the present value (PV), then compounding this PV to find the IRRIf a project’s IRR is greater than the WACC, then its NPV must be negative
Question 75 / 5 ptsWhich of the following statements is correct? Assume that the project beingconsidered has normal cash flows, with one outflow followed by a series ofinflows.The longer a project’s payback period, the more desirable the project isnormally considered to be by this criterion
The regular payback ignores cash flows beyond the payback period, but thediscounted payback method overcomes this problemIf a company uses the same payback requirement to evaluate all projects,say it requires a payback of 4 years or less, then the company will tend to

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 14 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Spring
Professor
MACHUCA

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture