Question

1. The​ after-tax cost of debt is higher than the​ before-tax cost of debt. True or False

2. The constant dividend growth model and CAPM are two ways of estimating a​ firm's cost of equity. True or False

3. The cost of capital uses the amounts of total assets and debt as the capital structure weights. True or False

4. In deriving the​ WACC, market values are preferred over book values for the capital structure weights. True or False

5. Ceteris paribus​, projects with lower than average risk should be evaluated using a higher than average WACC. True False

6. An unlevered firm is an​ all-equity firm. True or False

7. When estimating the cost of debt financing from​ bonds, a firm can use the yield. True or False

Answer 1

1. false

After tax rate = YTM * (1-Tax rate)

tax rate is always positive therefore based on above equation after tax rate is less than before tax rate