Whattypesofcapitaldofirmsuse?DebtPreferredstockCommonequity:RetainedearningsNewcommonstock Copyright©2001byHarcourt,Inc.Allrightsreserved.10-3 Shouldwefocusonbefore-taxorafter-taxcapitalcosts?StockholdersfocusonA-TCFs.Therefore,weshouldfocusonA-Tcapitalcosts,i.e.,useA-TcostsinWACC.Onlykdneedsadjustment.Co...
Calculate the WACC for a firm with a debt-equity ratio of 1.5. The debt pays 10% interest and the equity is expected to return 16%. Assume a 35% tax rate and risk-free debt. 参考答案:If D/E = 1.5, then debt = 60% and equity = 40%. WACC = (1 - ......
The WACC is used to ___ the expected cash flows when the firm has ___.___discount; debt and equity in the capital structureB.discount; short term financing on the balance sheetC.increase; debt and equity in the capital structureD.decrease; short term financing on the balance sheetE.Non...
ThecompositeWACCreflectstheriskofanaverageprojectundertakenbythefirm.Differentdivisionsmayhavedifferentrisks.Thedivision’sWACCshouldbeadjustedtoreflectthedivision’sriskandcapitalstructure.Estimatethecostofcapitalthatthedivisionwouldhaveifitwereastand-alonefirm.Thisrequiresestimatingthedivision’sbeta,costofdebt,and...
If a firm uses its WACC as the discount rate for all of the projects it undertakes then the firm will tend to:()A.reject some positive net present value projects.B.increase its overall level of risk over time.C.accept some negative net present value p
firm valuationcapital budgetingequity cost of capitalLlano-Ferro (2009) proposes a solution to avoid 'significant errors' when the Weighted Average Cost of Capital (WACC) obtained by the standard formula leads toSocial Science Electronic Publishing...
In calculating the weighted average cost of capital (WACC), which of the following statements is least likely correct()A.The cost of preferred equity capital is the preferred dividend divided by the price of preferred shares.B.The cost of debt is equal to one minus the marginal tax rate ...
刷刷题APP(shuashuati.com)是专业的大学生刷题搜题拍题答疑工具,刷刷题提供If a firm uses the weighted average cost of capital (WACC) to discount cash flows of higher than average risk projects, which one of the following will most likely occur()A.Project
Because the firm is being acquired, we assume the new owners will utilize an optimal capital structure and weights in the WACC calculation. The capital structure for public firms should not be used because public firms have better access to debt financing. The WACC using the optimal capital stru...
Firms with riskier projects generally have a higher WACC.,10-28,Should the company use the composite WACC as the hurdle 22、rate for each of its projects?,NO! The composite WACC reflects the risk of an average project undertaken by the firm. Therefore, the WACC only represents the “...