Investors typically accept a lower risk-adjusted rate of return on debt capital than on equity capital because 15

1. 14. Investors typically accept a lower risk-adjusted rate of return on debt capital than on equity capital because

debt is typically less risky because fixed claims bear less residual risk than equity claims.

2. 15. All of the following are steps in the analysis and valuation framework used to understand the fundamentals of a business and determine estimates of its value except:

Obtain the national ranking of the firm's external auditors.

3. 16. Under the cash-flow-based valuation approach, free cash flows can be used instead of dividends as the expected future payoffs to the investor in the numerator of the general valuation model because:

over the life of the firm, the free cash flows into the firm and cash flows paid out of the firm in dividends to shareholders will be equivalent.

4. 17. Returns on systematic risk-free securities (like U.S. Treasury securities) should exhibit what type of correlation with returns on a diversified marketwide portfolio of stocks?

no correlation.