Question

Only say choice

8. In order to maximize firm value, management should invest in new assets when the internal rate of retum a. greater or equal to the firm's marginal cost of capital. b. greater than the cost of debt financing. c. less than or equal to the accounting rate of return. 9. The cost of capital is: a. the opportunity cost of using funds to invest in new projects. b. the rate of return the firm must ean on its investments in order to satisfy the required rate of return of the firm's investors c the benchmark rate for new capital investments which have typical or average risk d. all of the above. 10. The cost of newly issued common stock is greater than the cost of retained earnings because of which of the following? a. Capital gains taxes on retained earnings b. Flotation costs on newly issued common stock c. Capital gains taxes on newly issued common stock d. All of the above e. The cost of newly issued common stock is not greater than the cost of retained earnings. 11. Which of the following formula calculates Free Cash Flow? a. Revenue-Cost-Depreciation-Tax-Capital Investment-Net Working Capital Investment b. Revenue-Cost-Depreciation-Tax+Depreciation-Capital Investment-Net Working Capital Investment Tax+Depreciation+Capital Investment+Net Working Capital Investment d. Revenue-Cost-Tax+Depreciation+ Capital Investment-Net Working Capital Investment e. None of the above. 12. Which of the following is a shortcoming of payback period? a. It gives different results with different discount rates b. It contradicts with discounted payback period c. It does not take all cash flows into consideration d. Discount rate used is subjective to the person who does the evaluation 13. Which of the following would decrease the Free Cash Flow of a firm? a. Higher depreciation all else equal b. Addition to the fixed assets c. Decrease in working capital d. Lower WACC 14. If debt is the cheapest source ofcapital, why firms do not finance project with 100%? a. Actually they do as long as debt remains as the cheapest source of capital b. Because equity financing is more profitable c. To diversify the investment risk d. To avoid financial distress 15. Which of the following would be wrong while estimating the discount rate for NPV analysis? Using a rate lower than average inflation over the life of the project Using the WACC without adjustment Changing the discount rate when type of the project varies Using different rates for each year a. b. c. d.

Answer 1

Since here they are not asking for the explanation i am not providing
8)Option A
9)Option D
10)option B
11)option B
12)option C
13)option B based on free cash flow formuale
14)option D
15)option A