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Business
University
Multinational Capital Structure and Cost of Capital
9 questions
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- 1. Open Ended
Explain capital structure of a firm.
- 2. Multiple Choice
Which is NOT discount rate?
Hurdle rate
Cost of Capital
Opportunity Cost
Beta
- 3. Multiple Choice
Capital structure refer to firm's mix of long-term debt and equity financing
TRUE
FALSE
- 4. Multiple Choice
A firm's WACC
is the proper discount rate for every project the firms undertakes
is used to value all of the firms's existing projects
is a benchmark discount rate that may be adjusted for the riskiness of each project
is for informational value only and should never be used as a discount rate
- 5. Multiple Choice
The WACC is the return the company needs to earn after tax in order to satisfy all its security holders.
TRUE
FALSE
- 6. Multiple Choice
When using the WACC as a discount rate, it is often adjusted upward for riskier projects and downward for safer projects
TRUE
FALSE
- 7. Multiple Choice
What is the debt ratio of a firm that has outstanding $15 million in bonds and equity with market value of $35 million?
15%
30%
35%
43%
- 8. Multiple Choice
The WACC for a firm with a 65/35 debt/equity split, pre-tax cost of debt, 15% cost of equity, and a 21% tax rate is:
9.36%
9.94%
10.45%
13.8%
- 9. Multiple Choice
What is the WACC for a firm with 50% debt that pays 12% on its debt, 20% on its equity and has a 21% tax rate?
9.6%
12%
14.7%
16%
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