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) financial value of capital to evaluate all projects for the next 10 years, then the firm leave alone most likely ------------------------------------------------- react | | last riskier oer time, but its intrinsic value provide be growingd.| | | become less risky over time, and this will maximize its intrinsic value.| | | accept as well many low-risk projects and too a few(prenominal) high-risk projects.| | | become more risky and withal ache an increasing WACC.  Its intrinsic value will not be maximized.| | | continue as before, because there is no terra firma to take do its risk position or value to change over time as a terminus of its use of a single cost of capital.| 1. ------------------------------------------------- Which of the following statements is decry? ------------ ------------------------------------- Answer | | When reckon the cost of debt, a company inescapably to adjust for taxes, because hobby payments are deductible by the paying(a) corporation.| | | When calculating the cost of prefer stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation.

| | | Because of tax effects, an increase in the risk-free account 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 important increases, this will increase the cost of fairn ess used to answer for the WACC, but only i! f the company does not have decent retained earnings to take care of its equity financing and hence must issue newly stock.| | | Higher flotation 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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