A firm's overall cost of financing is equal to: I. Its weighted-average cost of capital II. The required rate of return of its capital providers III. The returns being generated by investments Select one:

Which model is typically used to estimate the cost of using external equity capital? Group of answer choices capital asset pricing model rate of return on perpetuity model arbitrage pricing theory model dividend valuation model

The cost of a firmʹs equity Group of answer choices a. is independent of the firmʹs capital structure b. will always be higher than the stated interest rate on the financial debt of the firm c. can be substantially higher than the firmʹs weighted average cost of capital                                        d. must always be less than the firmʹs weighted average cost of capital

The financial manager of a firm determines the following schedules of cost of debt and cost of equity for various combinations of debt financing:   Debt/Assets After-Tax Cost of Debt Cost of Equity 0 % 4 % 7 % 10   4   7   20   4   7   30   4   9   40   5   10   50   5   12   60   8   13   70   8   15     Find the optimal capital structure (that is, optimal combination of debt and equity financing). Round your answers for the capital structure to the nearest whole number and for the cost of capital to one decimal place. The optimal capital structure:   % debt and   % equity with a cost of capital of   % Why does the cost of capital initially decline as the firm substitutes debt for equity financing? The cost of capital initially declines because the firm cost of debt is  than the cost of equity. Why will the cost of funds eventually rise as the firm becomes more financially leveraged? As the firm becomes more financially leveraged and riskier, the cost of debt…

While the Weighted Average Cost of Capital reflects the risk       perceived by in investors the “real risk” is­­­­­­ ____________

1- Discuss the concept of an optimal capital structure? 2- Distinguish between business and financial risk?

What is WACC (select all that are true)? Group of answer choices Rd (1-Tc) * D/V + Re * E/V Weighted Average Cost of Capital For a firm overall, it is based on the riskiness of the firm's assets While it is generally estimated by looking at the right-hand-side of the balance sheet, it is largely driven by the left-hand-side (i.e., assets) It is the amount that equity holders demand for an investment in a firm It is the amount that debt holders demand for a loan made to the firm

A firm’s weighted average cost of capital should not do which one of the following? Group of answer choices   measure the cost of short-term sources of funds measure cost on a marginal basis measure the cost of long-term sources of funds measure cost on an after-tax basis

3. Explain the relationship between the weighted average cost of capital (WACC), the maximization of firm value, and financial decision making.

The financial manager of a firm determines the following schedules of cost of debt and cost of equity for various combinations of debt financing:   Debt/Assets After-Tax Cost of Debt Cost of Equity 0 % 4 % 8 % 10   4   8   20   4   8   30   5   9   40   6   10   50   8   12   60   10   14   70   12   16     Find the optimal capital structure (that is, optimal combination of debt and equity financing). Round your answers for the capital structure to the nearest whole number and for the cost of capital to one decimal place. The optimal capital structure:   % debt and   % equity with a cost of capital of   % Why does the cost of capital initially decline as the firm substitutes debt for equity financing? The cost of capital initially declines because the firm cost of debt is  than the cost of equity. Why will the cost of funds eventually rise as the firm becomes more financially leveraged? As the firm becomes more financially leveraged and riskier, the cost of…