Question

N 301 0133020312.pdf X FIN 432 - Invest A long-term Pro X Finance Chapter X G Cash paymentse X webapps/assessment/take/launch.jsp?course_assessment_id=_17709_18.course_id=25356 18 content id=431107_1&step=null + 6 QUESTION 42 2.22 points Save Answer Following is the formula for the weighted average cost of capital WACC = T LTD (1-tax rate) W LTD + TPS WPS + r CS WCS Where: LTD is long term debt PS is preferred stock CS is common stock In the formula for the weighted average cost of capital, the cost of debt is adjusted for a. Interest b. Taxes Flotation costs 2.22 points Save Answer QUESTION 43 If a firm's capital is distributed in equal proportions, meaning 25% long term debt25% short term debt. 25% preferred stock and 25% common stock, the WACC is equal to the The arithmetic average of the required return on each of the components The geometric average of the required return on each of the components The standard deviation of the required return on each of the components Save Al Answers Save and Suit Die TIMAA Click Save and Submit to save and submit. Click Save All Anser to save all answers. 5:11

Answer 1

42)

Debt is always tax deductible as interest is paid off before the taxes. So the cost of debt is adjusted for by the taxes.

Answer is b) Taxes

43)

WACC is always the arithmetic weighted average of individual capital components in a capital structure as the indiividual components are equally weighed.

Answer is A) Arithmetic average of the required return on each of the components