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Corporate Finance: Cost of Common Equity / Equity Capital; NPV Technique; Capital Budgeting

**Please see attachment for multiple choice options.

1. For a typical firm with a given capital structure, which of the following is correct? (Note: All rates are after taxes.)

2. Which of the following approaches to estimating the cost of common equity is the least difficult to estimate?

3. Wyden Brothers has no retained earnings. The company uses the CAPM to calculate the cost of equity capital. The company's capital structure consists of common stock, preferred stock, and debt. Which of the following events will reduce the company's WACC?

4. If the result of applying the NPV technique for evaluating a capital project is a negative figure, it implies that:

5. A firm may not be able to undertake all possible capital projects that have positive NPVs. Some reasons may not be financial, but for a firm to determine which capital techniques are most financially viable:

6. When evaluating capital budgeting projects, most managers of big companies gravitate toward:

7. A project has an up-front cost of $100,000. The project's WACC is 12 percent and its net present value is $10,000. Which of the following statements is most correct?

8. Which of the following statements is most correct?

9. A company estimates that its weighted average cost of capital (WACC) is 10 percent. Which of the following independent projects should the company accept?

10. The internal rate of return (IRR) is the rate of interest that makes the present value of the cash inflows:

11. A company is considering a new project. The company's CFO plans to calculate the project's NPV by discounting the relevant cash flows (which include the initial up-front costs, the operating cash flows, and the terminal cash flows) at the company's cost of capital (WACC). Which of the following factors should the CFO include when estimating the relevant cash flows?

12. Which of the following is discussed in the text as a method for analyzing risk in capital budgeting?

13. A firm is considering the purchase of an asset whose risk is greater than the current risk of the firm, based on any method for assessing risk. In evaluating this asset, the decision maker should

14. Business risk is concerned with the operations of the firm. Which of the following is not associated with (or not a part of) business risk?

15. Which of the following statements is most correct?

16. Which of the following statements is most correct?

17. Which of the following statements is most correct?

18. When a firm offers its shareholders the opportunity to reinvest their dividends into additional shares of stock as an alternative to cash dividends, the tax implications:

19. The underlying reason for investors' aversion to receiving income from dividends is the less favorable tax treatment of dividend income. Capital gain income offers the following tax advantage(s) over dividend income: