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3. Which of the following are acceptable criteria for determining the weights in the weighted average cost of capital? Market value of the capital structure and historical costs of financing Market value of the capital structure and the target mix of debt and equity Using the after-tax cost of debt and the market value of the capital structure Using the book value of the capital structure and the prior level of debt and equity

3. Which of the following are acceptable criteria for determining the weights in the weighted average cost of capital? Market value of the capital structure and historical costs of financing Market value of the capital structure and the target mix of debt and equity Using the after-tax cost of debt and the market value of the capital structure Using the book value of the capital structure and the prior level of debt and equity

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1. What problem arises as a result of the separation of ownership and management of a firm? Advocacy problem Agency problem Self-interest problem Subordination problem 2. What is the nominal rate of return of a 10-year Treasury bond if the prevailing risk premiums are as follows: real-risk free rate is 2.0%; inflation premium is 5.0%; maturity risk premium is 0.3%; and default risk premium is 0.2%. O 2.00% 7.00% O 7.30% 7.50% 3. Which of the following are acceptable criteria for determining the weights in the weighted average cost of capital? Market value of the capital structure and historical costs of financing Market value of the capital structure and the target mix of debt and equity Using the after-tax cost of debt and the market value of the capital structure Using the book value of the capital structure and the prior level of debt and equity
Transcribed Image Text:1. What problem arises as a result of the separation of ownership and management of a firm? Advocacy problem Agency problem Self-interest problem Subordination problem 2. What is the nominal rate of return of a 10-year Treasury bond if the prevailing risk premiums are as follows: real-risk free rate is 2.0%; inflation premium is 5.0%; maturity risk premium is 0.3%; and default risk premium is 0.2%. O 2.00% 7.00% O 7.30% 7.50% 3. Which of the following are acceptable criteria for determining the weights in the weighted average cost of capital? Market value of the capital structure and historical costs of financing Market value of the capital structure and the target mix of debt and equity Using the after-tax cost of debt and the market value of the capital structure Using the book value of the capital structure and the prior level of debt and equity
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