The yield-to-maturity of a firm's bond is 8

1. The yield-to-maturity of a firm's bond is 8.5%. The firm has a beta of 1.3 and a tax rate of 34%. The market risk premium is 8.4% and the risk-free rate is 3.8%. What is the firm's WACC if the firm has a capital structure that is 40% debt financed?

11.08%

2. If a firm has twice as much equity as debt in its capital structure, then the firm is financed with:

66.7% equity

3. If a firm has three times as much equity as debt in its capital structure, then the firm is financed with:

25.0%

4. If a company's cost of capital is less than the required return on equity, then the firm:

has debt in its capital structure

5. The company cost of capital is the return that is expected on a portfolio of the company's:

existing securities

6. A firm with a beta of 1.22 just paid its annual dividend of $5.64 a share. The dividends increase at a rate of 2% annually. The risk-free rate is 3.5%, the market rate of return is 12.4%, and the dividend discount rate is 11.6%. What is the best estimate of the firm's cost of equity if the firm's stock currently sells for $60 a share using an average of methods?

12.97%

7. What is the WACC for a firm financed with 30% debt if the debt requires an after-tax return of 10% and equity requires a 16% return?

14.2%

8. Which one of the following changes would tend to increase the WACC for a traditional firm?

decrease the proportion of debt financing

9. A firm is considering expanding its current operations and has determined the internal rate of return on that expansion is 12.2%. The firm's WACC is 11.8%. Given this, you know the:

expansion should be undertaken as it has a positive net present value

10. A firm has 12,500 shares of stock outstanding that sell for $42 each. The book value of equity is $400,000. The firm has also issued $250,000 face value of debt that is currently quoted at 101.2. What value should be used as the weight of equity when computing WACC?

67.48%