A company with a beta of 1.5 is considered
FIN303_Chap 13 (Review)

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Business
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University
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Medium
(FUGHN Huyen
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16 questions
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1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Less volatile than the market
As volatile as the market
More volatile than the market
Not correlated with the market
2.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
XYZ Corporation has 5 million shares outstanding at a current price of $20 per share. The book value of the shares is $12 per share. The firm also has $50 million in par value of bonds outstanding. The bonds are selling at a price equal to 105 percent of par. What is the market value of the firm?
$100 mil
$52.5 mil
$152.5 mil
$150 mil
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which of the following is true about the relationship between risk and cost of capital?
Higher risk leads to a lower cost of capital.
Lower risk leads to a higher cost of capital.
Higher risk leads to a higher cost of capital.
Risk and cost of capital are not related
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
A firm's overall cost of capital is
equal to its cost debt.
a weighted average of the costs of capital for the collection of individual projects that the firm is working on.
best measured by the cost of capital of the riskiest projects that the firm is working on.
the value of the cash flows claimed by both the equity and debt investors.
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
When estimating the cost of debt capital for the firm, we are primarily interested in
the value of the cash flows claimed by the equity investors.
the value of the cash flows claimed by the debt investors.
the value of the cash flows claimed by both the equity and debt investors.
the revenue produced by the firm.
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
The recommended model to estimate the cost of common equity for a firm is
a one-stage constant growth model.
a multistage growth model
the CAPM.
none of these.
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How does an increase in the market risk premium affect the cost of equity?
The cost of equity decreases.
The cost of equity increases.
The cost of equity remains the same.
The cost of debt increases.
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