Which of the following statements refers to the unlevered cost of capital? O the interest tax shield times pretax net income. O the cost of capital for a firm that has no equity in its capital structure. O equal to the profit margin for a firm with some debt in its capital structure. O the cost of capital for a firm that has no debt in its capital structure. the cost of preferred stock for a firm with equal parts debt and common stock in its capital structure.

Which of the following statements refers to the unlevered cost of capital? O the interest tax shield times pretax net income. O the cost of capital for a firm that has no equity in its capital structure. O equal to the profit margin for a firm with some debt in its capital structure. O the cost of capital for a firm that has no debt in its capital structure. the cost of preferred stock for a firm with equal parts debt and common stock in its capital structure.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 1Q: Define each of the following terms: Weighted average cost of capital, WACC; after-tax cost of debt,...

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The cost of equity is _______. A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnover
Define each of the following terms: Weighted average cost of capital, WACC; after-tax cost of debt, rd(1 – T); after-tax cost of short-term debt, rstd(1 – T) Cost of preferred stock, rps; cost of common equity (or cost of common stock), rs Target capital structure Flotation cost, F; cost of new external common equity, re
Which of the following statements refers to the unlevered cost of capital? the cost of preferred stock for a firm with equal parts debt and common stock in its capital structure. equal to the profit margin for a firm with some debt in its capital structure. the cost of capital for a firm that has no debt in its capital structure. the cost of capital for a firm that has no equity in its capital structure. O the interest tax shield times pretax net income.
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.
The cost of equity is ________. Group of answer choices A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnover
The cost of equity is ________. a.equal to the amount of asset turnover b.the interest associated with debt c.the weighted average cost of capital d.the rate of return required by investors to incentivize them to invest in a company
Calculate: 1.Total Market Value for the firm 2.After tax cost of debt 3.Cost of equity 4.Cost of preferred stock 5.weighted average cost of capital
Which of the following steps is not required when estimating a firm’s weighted average cost of capital?a. Evaluate the firm’s capital structure and determine the relative weight of each component in the mix.b. Estimate the opportunity cost of each of the sources of financing and adjust it for the effects of taxes where appropriate.c. Subtract the weighting of preferred stock and reallocate the weighting to equity and debt.d. Calculate the weighted average cost of capital by computing a weighted average of the estimated after-tax costs of the various capital sources used by the firm.e. These are all steps taken to calculate the weighted average cost of capital.
How would each of the following scenarios affect a firm's cost of debt, r d (l - t), t=tax rate; its cost of equity, rs; and its WACC? Indicate with an increase (I), a decreease (D), or no change (N) whether the factor would raise, lower, or have an indeterminate effect on the item in question. Assume for each answer that other things are held constant, even though in some instances this would probably not be true. rd (1-t) rs WACC 4) The dividend payout ratio is increased. 5) The firm expands into a risky new area. 6) Investors become more risk-averse. 7) The firm is an electric utility with a large investment innuclear plants. Several states are considering a ban on nuclear power generation.
The weighted average cost of capital for a firm: O is equivalent to the after-tax cost of the firm's outstanding debt. O is a weighted average between the cost of equity and the (after-tax) cost of debt. O is unaffected when there is any change in the corporate tax rate. O remains constant when the firm's capital structure changes.
Which of the following must be adjusted for the firm's tax rate when estimating the weighted average cost of capital WACC? O Cost of common equity O All of those choices Cost of debt O Cost of preferred stock
How would each of the following scenarios affect a firm's cost of debt, r d (l - t), t=tax rate; its cost of equity, rs; and its WACC? Indicate with an increase (I), a decreease (D), or no change (N) whether the factor would raise, lower, or have an indeterminate effect on the item in question. Assume for each answer that other things are held constant, even though in some instances this would probably not be true. rd (1-t) rs WACC 1) The corporate tax rate is lowered. 2) The Federal Reserve tightens credit. 3) The firm uses more debt; that is, it increases its debt ratio 4) The dividend payout ratio is increased. 5) The firm expands into a risky new area. 6) Investors become more risk-averse. 7) The firm is an electric utility with a large investment innuclear plants. Several states are considering a ban on nuclear power generation.