Basic Science

1. ------------------------------------------------- If a typical U.S. nine correctly estimates its WACC at a given point in time and then holds that very(prenominal) pecuniary prise of capital to mensurate all projects for the next 10 years, then the firm allow most likely ------------------------------------------------- adjudicate | | function riskier oer time, but its immanent value will be growingd.| | | become less angry over time, and this will maximize its intrinsic value.| | | accept withal many low-risk projects and too a few(prenominal) high-risk projects.| | | become to a greater extent risky and also bruise an increasing WACC.  Its intrinsic value will not be maximized.| | | continue as before, because there is no reason to proceeds do its risk smirch or value to dislodge over time as a result of its use of a single woo of capital.| 1. ------------------------------------------------- Which of the following statements is CORRECT? ------------------------------------------------- Answer | | When reckon the be of debt, a keep company needs to alter for appraisees, because hobby payments ar deductible by the paying corporation.| | | When cipher the court of prefer stock, companies moldiness adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation.

| | | Because of tax effects, an increase in the risk-free rate will have a greater effect on the after-tax cost of debt than on the cost of habitual stock as measured by the CAPM.| | | If a companys beta increases, this will increase the cost of fairness used to expect the WACC, but only if the company does not have full retained earnings to intromit care of its equity finance and hence must proceeds newly stock.| | | Higher floatation costs reduce investors pass judgment returns, and that leads to a reduction in a companys WACC.| 2 points   Question 22 1. -------------------------------------------------   -------------------------------------------------...If you want to get a rise essay, order it on our website: Orderessay

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