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Just Answers Need ASAP Question 46 Which one of the following represents the rate of return...

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Question 46
Which one of the following represents the rate of return a firm must earn on its assets if it is to maintain the current value of its securities?

Select one:
a. Cost of equity
b. Internal rate of return
c. Aftertax cost of debt
d. Weighted average cost of capital
e. Debt-equity ratio


Question 47
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Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 9 percent, matures in 3 years, has a total face value of $6 million, and is quoted at 108 percent of face value. The second issue has a 7.5 percent coupon, matures in 16 years, has a total face value of $18 million, and is quoted at 97 percent of face value. Both bonds pay interest semiannually. What is the firm's weighted average aftertax cost of debt if the tax rate is 35 percent?

Select one:
a. 4.78 percent
b. 5.12 percent
c. 5.63 percent
d. 5.95 percent
e. 6.08 percent


Question 48
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Which one of the following will decrease the aftertax cost of debt for a firm?

Select one:
a. Decrease in the firm's beta
b. Increase in tax rates
c. Increase in the risk-free rate of return
d. Decrease in the market price of the debt
e. Decrease in a bond's yield to maturity


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You need to use the pure play approach to assign a cost of capital to a proposed investment. Which one of the following characteristics should you most concentrate on as you search for an appropriate pure play firm?

Select one:
a. Firm size
b. Firm location
c. Firm experience
d. Firm operations
e. Firm management


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Cromwell's Interiors is considering a project that is equally as risky as the firm's current operations. The firm has a cost of equity of 13.7 percent and a pretax cost of debt of 8.4 percent. The debt-equity ratio is .65 and the tax rate is 40 percent. What is the cost of capital for this project?

Select one:
a. 9.97 percent
b. 10.29 percent
c. 11.38 percent
d. 11.62 percent
e. 12.30 percent
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Answer #1

46. A firms capital structure consists of Equity share capital , Preference share capital and debt. All these requires different rates of return so company need to calculate weighted average cost of capital. weighted average cost of capital is the minimum rate of return a firm must earn on its assets if it is to maintain the current value of its securities

Answer D

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