FIN405 review
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A firm has a market value of equity of $30,000. It borrows $7500 at 8%. If the unlevered cost of equity is 15%, what is the firm's cost of equity capital? 16.75%. 6.70%. 20.10%. 23.45%.
16.75%.
MM Proposition I states that in a perfect capital market the total value of a firm is equal to the market value of the ________ generated by its assets. Earnings after taxes. Earnings after interest. Cash flows after taxes. Free cash flows.
Free cash flows.
Managers should make use of the interest tax shield if a firm has ________. Consistent taxable income. Volatility in taxable income. Consistent dividend payments. Low tax rates.
consistent taxable income.
