Which of the following statements is true regarding capital structure? In a worl

Question

Which of the following statements is true regarding capital structure? In a world with no taxes and no bankruptcy costs, the optimal capital structure would be the one with 100% debt and no equity. In a world with no taxes and no bankruptcy costs, the value of a levered company would be the same as the value of an unlevered company In a world with no taxes and no bankruptcy costs, the cost of equity does not change with leverage. In a world with no taxes and no bankruptcy costs, you can increase the share price of stock by increasing debt and reducing equity. A $25 investment produces $27.50 at the end of the year with no risk Which of the following is true? NPV is positive if the interest rate is less than 10%. NPV is negative if the interest rate is less than 10%. NPV is zero if the interest rate is equal to 10%. Both A and C. There is a conflict between mutually exclusive projects due to the IRR, one should drop the two projects immediately spend more money on gathering information. depend on the NPV as it will always provide the most value depend on the PI because it does not suffer from these same problems. Given the following information, what is the firm's weighted average cost of capital? Market value of equity = $50 million; market value of debt $30 million; cost of equity = 16%; cost of debt = 8%; equity beta = 1.25; tax rate = 34%. 11.29% 11.45% 11.98% 12.32%. Asset A has an expected return of 15%. The expected market return is 14% and the risk-free rate is 4%. What is Asset A's beta? .50 .75 1.1 1.8 An investment with on initial cost of$15,000 produces cash flows of $5,000 annually for 5 years. If the cash flow is evenly spread out over the year and the firm can borrow al 10%, the discounted payback period is years. 3 3.2 3.75 4 A firm is considering an emerging market project that costs $100, 000 today and is expected to generate end-of-year annual cash flow of $20, 000 forever. At what discount rate Adidas would be indifferent between accepting and rejecting the project? 10% 20% 30% 40%

Explanation / Answer

7)B.

8)D

9)C..

10)A

11)D

12)A

13)C

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.