CHAPTER 15中国少年先锋队
Cost of Capital
I. DEFINITIONS
COST OF CAPITAL
a 1. The opportunity cost associated with the firm’s capital investment in a project is called
its:
a. cost of capital.
b. beta coefficient.
c. capital gains yield.
d. sunk cost.
e. internal rate of return.
COST OF EQUITY
护照用英语怎么说b 2. The return that shareholders require on their investment in the firm is called the:
a. dividend yield.
b. cost of equity.
c. capital gains yield.
d. cost of capital.
e. income return.
COST OF DEBT
c 3. The return that lenders require on their loaned funds to the firm is called the:
a. coupon rate.
b. current yield.
c. cost of debt.
d. capital gains yield.
e. cost of capital.
CAPITAL STRUCTURE WEIGHTS
d 4. The proportions of the market value of the firm’s asts financed via debt, common
stock, and preferred stock are called the firm’s:
a. financing costs.
b. portfolio weights.
c. beta coefficients.
d. capital structure weights.
e. costs of capital.
WACC
e 5. The weighted average of the firm’s costs of equity, preferred stock, and aftertax debt is
the:
a. reward to risk ratio for the firm.
b. expected capital gains yield for the stock.
c. expected capital gains yield for the firm.
d. portfolio beta for the firm.
e. weighted average cost of capital (WACC).
DIVISIONAL COST OF CAPITAL
a 6. For a firm with multiple business units, the cost of capital developed for each unit is
called a:
a. divisional cost of capital.
b. pure play approach.
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c. subjective risk adjustment.
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d. stratified beta coefficient.
e. fundamental beta coefficient.
PURE PLAY APPROACH
b 7. When firms develop a WACC for individual projects bad on the cost of capital f
or
other firms in similar lines of business as the project, the firm is utilizing a _____
approach.
a. subjective risk
b. pure play
c. divisional cost of capital
d. capital adjustment
e. curity market line
FLOTATION COSTS
c 8. The costs incurred by the firm when new issues of stocks or bonds are sold are called:
a. required rates of return.
b. costs of capital.
c. flotation costs.
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d. capital structure weights.
e. costs of equity and debt.
II. CONCEPTS
COST OF CAPITAL
e 9. The cost of capital:
a. will decrea as the risk level of a firm increas.
b. is primarily dependent on the source of the funds ud in a project.
c. implies that a project will produce a positive net prent value only when the rate of
return on the project is less than the cost of capital.
d. remains constant for all projects sponsored by the same firm.
e. depends on how the funds are going to be utilized.
COST OF CAPITAL
c 10. The overall cost of capital for a retail store:
a. is equivalent to the after-tax cost of the firm’s liabilities.
b. should be ud as the required return when analyzing a potential acquisition of a wholesale distributor.
c. reflects the return investors require on the total asts of the firm.
d. remains constant even when the debt-equity ratio changes.
武汉理工大学研究生 e. is unaffected by changes in corporate tax rates.
COST OF EQUITY
d 11. A firm’s overall cost of equity is:
宣传软文 I. directly obrvable in the financial markets.
II. unaffected by changes in the market risk premium.
III. highly dependent upon the growth rate and risk level of a firm.
IV. an estimate only.
a. I and III only
b. II and IV only
c. I and II only
d. III and IV only
e. I and IV only
COST OF EQUITY
b 12. The cost of equity for a firm is:
a. determined by directly obrving the rate of return required by equity investors.
b. bad on estimates derived from financial models.
c. equivalent to a leveraged firm’s cost of capital.
d. equal to the risk-free rate of return plus the market risk premium.
e. equal to the risk-free rate of return plus the dividend growth rate.
DIVIDEND GROWTH MODEL
c 13. The dividend growth model:
a. can be ud to estimate the cost of equity for any corporation.
b. is applicable only to firms that pay a constant dividend.
c. is highly dependent upon the estimated rate of growth.
d. is considered quite complex.
e. considers the risk of the firm.
DIVIDEND GROWTH MODEL
c 14. The dividend growth model:
a. generally produces the same estimated cost of equity for a firm regardless of the source
梦见捡蛋 of information ud to predict the rate of growth.
b. can only be ud if historical dividend information is available.
c. ignores the risk that future dividends may vary from their estimated values.
