Which one of the following changes offers the greatest chance of changing a project's NPV from negative to positive? What decision should be made on a project of above-average risk if the project's IRR exceeds the WACC? If equity investors require a 20% rate of return, what is the maximum acceptable amount of equity financing for a project with $2 million annual cash flows before tax and interest, $3 million in debt with a 10% coupon, and a 35% tax rate? For purposes of computing the WACC, if the book value of equity exceeds the market value of equity, then: How much cash flow before tax and interest is necessary to support a project that requires $4 million annually for equity investors and $2 million annually in interest payments if the firm's tax rate is 35%? What percentage of value should be allocated to equity in WACC computations for a firm with $50 million in debt selling at 85% of par, $50 million in book value of equity, and $65 million in market value of equity? According to CAPM estimates, what is the cost of equity for a firm with a beta of 1

1. Which one of the following changes offers the greatest chance of changing a project's NPV from negative to positive?

Reducing the risk level of the project

2. What decision should be made on a project of above-average risk if the project's IRR exceeds the WACC?

Decide after discounting at an appropriate rate

3. If equity investors require a 20% rate of return, what is the maximum acceptable amount of equity financing for a project with $2 million annual cash flows before tax and interest, $3 million in debt with a 10% coupon, and a 35% tax rate?

$5.53 million

4. For purposes of computing the WACC, if the book value of equity exceeds the market value of equity, then:

the market value of equity should be used

5. How much cash flow before tax and interest is necessary to support a project that requires $4 million annually for equity investors and $2 million annually in interest payments if the firm's tax rate is 35%?

$8.15 million

6. What percentage of value should be allocated to equity in WACC computations for a firm with $50 million in debt selling at 85% of par, $50 million in book value of equity, and $65 million in market value of equity?

60.47%

7. According to CAPM estimates, what is the cost of equity for a firm with a beta of 1.5 when the risk-free interest rate is 6% and the expected return on the market portfolio is 15%?

19.5%

8. What return on equity do investors seem to expect for a firm with a $55 share price, an expected dividend of $4.60, a beta of 0.9, and a constant growth rate of 3.5%?

11.86%

9. Changing the capital structure by adding debt will not:

decrease debt holder risk

10. The company cost of capital:

measures that investors require from the company