PRIN.OF CORPORATE FINANCE >BI<
12th Edition
ISBN: 9781260431230
Author: BREALEY
Publisher: MCG CUSTOM
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Textbook Question
Chapter 2, Problem 5PS
- a. Equals the interest rate at which the company can borrow.
- b. Depends on the risk of the cash flows to be valued.
- c. Depends on the
rates of return that shareholders can expect to earn by investing on their own. - d. Equals zero if the firm has excess cash in its bank account and the bank account pays no interest.
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Check out a sample textbook solutionStudents have asked these similar questions
1. Which of the following is not a component used in calculating the cost of capital?
A. The cost of short-term debt.
B. The cost of common stock.
C. The cost of long-term debt.
D. The cost of retained earnings.
2. Which of the following statements about cost of capital is false?
A. The overall cost of capital is the minimum rate a firm must earn on all investments to cover capital costs.
B. The overall cost of capital is the cost of the firm's equity capital at which the market value of the firm will remain unchanged.
C. Cost of capital is based on what the company pays for its capital, not the return earned on the capital employed.
D. The overall cost of capital is the weighted average cost of the various debt and equity components in a firm's capital structure.
What is the blend of long-term financial sources used to finance the firm which may include debt, equity and preferred stock?
اخترأحد الخيارات
a. Risk and Return
b. Capital Budgeting
c. Profit Maximization
d. None of the option
e. Working Capital
Creditors look for
a. Net working capital for their safety
b. High net working capital for their safety
c. Less net working capital for their safety
d. None of the options
e. Balance net working capital for their safety
Which of the following is NOT a conclusion drawn from M&M's Propositions 1 and 2?
a. Shareholder's required return rises with leverage.
b. The WACC does not change as capital structure change.
c. Firm value is determined by the left hand of the balance sheet the firm's assets, and the cash flow generated by them.
d. The WACC is determined by the riskiness of the company's business (assets).
e. A firm can change its market value by splitting its cash flows into different streams.
Chapter 2 Solutions
PRIN.OF CORPORATE FINANCE >BI<
Ch. 2 - (FV) In 1880, five aboriginal trackers were each...Ch. 2 - Prob. 2SQCh. 2 - (PV) Your company can lease a truck for 10,000 a...Ch. 2 - (RATE) Ford Motor stock was one of the victims of...Ch. 2 - Prob. 5SQCh. 2 - Prob. 6SQCh. 2 - Prob. 8SQCh. 2 - (NOMINAL) What monthly compounded interest rate...Ch. 2 - Future values If you invest 100 at an interest...Ch. 2 - Discount factors If the PV of 139 is 125, what is...
Ch. 2 - Prob. 3PSCh. 2 - Prob. 4PSCh. 2 - Opportunity cost of capital Which of the following...Ch. 2 - Perpetuities An investment costs 1,548 and pays...Ch. 2 - Growing perpetuities A common stock will pay a...Ch. 2 - Prob. 8PSCh. 2 - Present values What is the PV of 100 received in:...Ch. 2 - Continuous compounding The continuously compounded...Ch. 2 - Compounding intervals You are quoted an interest...Ch. 2 - Future values and annuities a. The cost of a new...Ch. 2 - Prob. 13PSCh. 2 - Present values A factory costs 800,000. You reckon...Ch. 2 - Present values A machine costs 380,000 and is...Ch. 2 - Opportunity cost of capital Explain why we refer...Ch. 2 - Present values A factory costs 400,000. It will...Ch. 2 - Present values and opportunity cost of capital...Ch. 2 - Prob. 19PSCh. 2 - Prob. 20PSCh. 2 - Annuities David and Helen Zhang are saving to buy...Ch. 2 - Annuities Kangaroo Autos is offering free credit...Ch. 2 - Present values Recalculate the NPV of the office...Ch. 2 - Prob. 24PSCh. 2 - Prob. 25PSCh. 2 - Continuous compounding How much will you have at...Ch. 2 - Perpetuities You have just read an advertisement...Ch. 2 - Compounding intervals Which would you prefer? a....Ch. 2 - Compounding intervals A leasing contract calls for...Ch. 2 - Annuities Several years ago, The Wall Street...Ch. 2 - Prob. 31PSCh. 2 - Prob. 32PSCh. 2 - Prob. 33PSCh. 2 - Prob. 34PSCh. 2 - Prob. 35PSCh. 2 - Amortizing loans Suppose that you take out a...Ch. 2 - Prob. 37PSCh. 2 - Annuities Use Excel to construct your own set of...Ch. 2 - Declining perpetuities and annuities You own an...
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