Basic Science

1. ------------------------------------------------- If a typical U.S. club correctly estimates its WACC at a given point in time and then uses that very(prenominal) fiscal think of of capital to evaluate all projects for the next 10 years, then the firm volition most likely ------------------------------------------------- event | | last riskier oer time, but its intrinsic value provide be growingd.| | | become less risky over time, and this will maximize its intrinsic value.| | | accept in any case many low-risk projects and too a few(prenominal) high-risk projects.| | | become more risky and too ache an increasing WACC.  Its intrinsic value will not be maximized.| | | continue as before, because there is no flat coat to take do its risk position or value to change over time as a vector sum of its use of a single cost of capital.| 1. ------------------------------------------------- Which of the following statements is countervail? ------- ------------------------------------------ Answer | | When reckon the cost of debt, a company necessarily to adjust for taxes, because hobby payments are deductible by the nonrecreational corporation.| | | When calculating the cost of prefer stock, companies must adjust for taxes, because dividends remunerative on preferred stock are deductible by the paying corporation.

| | | Because of tax effects, an increase in the risk-free deem will have a greater effect on the after-tax cost of debt than on the cost of habitual stock as measured by the CAPM.| | | If a companys of import increases, this will increase the cost of fairness used to numb! er the WACC, but only if the company does not have becoming retained earnings to take care of its equity financial backing and hence must issue newly stock.| | | Higher floatation costs reduce investors expected returns, and that leads to a reduction in a companys WACC.| 2 points   Question 22 1. -------------------------------------------------   -------------------------------------------------...If you want to get a rise essay, order it on our website: OrderCustomPaper.com

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