Which of the following is true for risk aversion?

Requires more return for more risk

Which of the following apply if finance managers are good stewards of investor funds when pursuing projects?

Rate of return > = what investors can receive elsewhere

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Cost of Capital

15 termsStudBud Administration259 plays

#cost of capital #finance

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Questions 15

Answers

1
What is generally used as a measure of risk free rate for CAPM?
10 year corporate bond
None of the answers is correct
10 year Treasury bond
Low risk stock from financially strong company
2
Which of the following is true for risk aversion?
Requires less return for more risk
Two of the answers are correct
Requires more return for more risk
Does not change over time
3
Beta for the market is _____________?
= 1
< 1
> 1
= to risk free rate
4
Rs represents what?
None of the answers is correct
Cost of new stock issuance
Cost of preferred stock
Cost of retained earnings
5
Why do firms not generally issue new shares of stock?
Increases supply of shares, which pushes down price
Flotation costs increase cost of stock
Negative signal that shares are overvalued
All of the answers are correct
6
For which of the following component costs would the after tax cost be relevant in calculating WACC?
Preferred stock
None of the answers is correct
Marketable securities
Common stock
7
The yield to maturity on a bond issued five years ago would be an appropriate proxy for cost of debt today?
True
False
8
Dividend yield is expressed as _____?
D0 / P0
g
None of the answers is correct
D1 / P0
9
Using discounted cash flow (DCF), which of following increases price of stock?
Increase in dividends paid out
All of the answers are correct
Decrease of cost of stock
Increase in growth rate of earnings
10
If return on market portfolio is 9% and market risk premium (RPM) is 3%, what is risk free rate?
6%
9%
3%
12%
11
An increase in beta will _____
increase rs and lower price
decrease rs and lower price
no change in rs but higher price
None of the answers is correct
12
Investor supplied funds include which of the following?
Bonds
Preferred Stock
Two of the answers are correct
Delayed payment of spontaneous liabilities
13
Which of the following represents a maximization of shareholder value?
Where return on equity is maximized
Where earnings per share are maximized
Where WACC is minimized
Where return on assets is equal to 0
14
Bond yield plus risk premium is used to value what?
None of the answers is correct
Cost of Stock
CAPM
After tax cost of debt
15
Which of the following apply if finance managers are good stewards of investor funds when pursuing projects?
Where opportunity cost is maximized
Rate of return > = what investors can receive elsewhere
None of the answers is correct
Rate of return < what investors can receive elsewhere

Cost of Capital Flashcards | StudBud

Cost of Capital

15 termsStudBud Administration259 plays

#cost of capital #finance

Flashcards15 cardsFPractice quizPHost liveL

Questions 15

Answers

1
What is generally used as a measure of risk free rate for CAPM?
10 year corporate bond
None of the answers is correct
10 year Treasury bond
Low risk stock from financially strong company
2
Which of the following is true for risk aversion?
Requires less return for more risk
Two of the answers are correct
Requires more return for more risk
Does not change over time
3
Beta for the market is _____________?
= 1
< 1
> 1
= to risk free rate
4
Rs represents what?
None of the answers is correct
Cost of new stock issuance
Cost of preferred stock
Cost of retained earnings
5
Why do firms not generally issue new shares of stock?
Increases supply of shares, which pushes down price
Flotation costs increase cost of stock
Negative signal that shares are overvalued
All of the answers are correct
6
For which of the following component costs would the after tax cost be relevant in calculating WACC?
Preferred stock
None of the answers is correct
Marketable securities
Common stock
7
The yield to maturity on a bond issued five years ago would be an appropriate proxy for cost of debt today?
True
False
8
Dividend yield is expressed as _____?
D0 / P0
g
None of the answers is correct
D1 / P0
9
Using discounted cash flow (DCF), which of following increases price of stock?
Increase in dividends paid out
All of the answers are correct
Decrease of cost of stock
Increase in growth rate of earnings
10
If return on market portfolio is 9% and market risk premium (RPM) is 3%, what is risk free rate?
6%
9%
3%
12%
11
An increase in beta will _____
increase rs and lower price
decrease rs and lower price
no change in rs but higher price
None of the answers is correct
12
Investor supplied funds include which of the following?
Bonds
Preferred Stock
Two of the answers are correct
Delayed payment of spontaneous liabilities
13
Which of the following represents a maximization of shareholder value?
Where return on equity is maximized
Where earnings per share are maximized
Where WACC is minimized
Where return on assets is equal to 0
14
Bond yield plus risk premium is used to value what?
None of the answers is correct
Cost of Stock
CAPM
After tax cost of debt
15
Which of the following apply if finance managers are good stewards of investor funds when pursuing projects?
Where opportunity cost is maximized
Rate of return > = what investors can receive elsewhere
None of the answers is correct
Rate of return < what investors can receive elsewhere