Sophia: Principles of Finance Unit 4- Challenge 1

Using the following variables, calculate an organization's cost of debt on a $100,000 bond. Rf: 2% Credit-risk rate: 6% t: 20%

$6,400

Based solely on their current weighted average cost of capital, which company should pursue an investment opportunity with an expected return of 6%

Both Company A and Company B.

When making investment decisions, what measurement tells you the compensation needed to assume a given level of risk?

Required rate of return

The capital asset pricing model is useful for ________________.

determining whether an asset's expected return will offset its susceptibility to market risk