finance ch 11 questions [final exam pls study]

The cost of capital is​ ________. A. the cost of each financing component multiplied by that​ component's percent of the total borrowed B. another name for the IRR C.the cost of debt in a firm that finances with both debt and equity D.All of the above

A. the cost of each financing component multiplied by that​ component's percent of the total borrowed

When calculating the after−tax weighted average cost of capital​ (WACC), which of the following costs is adjusted for taxes in the​ equation? A. The before−tax cost of preferred stock B. The after−tax cost of debt C. The before−tax cost of equity D. The before−tax cost of debt

D. The before−tax cost of debt

The​ ________ of an asset or liability is its cost carried on the balance sheet. A. theoretical value B. market value C.hybrid value D. book value

D. book value

Investors​ ________ for estimating the WACC. A. prefer a mix of book and market value B. prefer book value to market value C. are indifferent between using market and book value D. prefer market value to book value

D. prefer market value to book value

The cost of capital (WACC) uses the amounts of total assets and debt as the capital structure weights.

FALSE: it uses EQUITY and debt. (See WACC formula)

The​ after-tax cost of debt is higher than the​ before-tax cost of debt.

False

Ceteris paribus​, projects with lower than average risk should be evaluated using a higher than average WACC.

False: Less risk = probably less debt and less equity

In deriving the​ WACC, market values are preferred over book values for the capital structure weights.

True

The constant dividend growth model and CAPM are two ways of estimating a​ firm's cost of equity.

True

The cost of capital (WACC) is also known as the​ "hurdle rate".

True

An unlevered firm is an​ all-equity firm.

True. No leverage = no debt, which means all equity