The optimal capital structure has been achieved when the:   Multiple Choice   cost of equity is maximized given a pretax cost of debt.   debt-equity ratio results in the lowest possible weighted average cost of capital.   debt-equity ratio is such that the cost of debt exceeds the cost of equity.   weight of equity is equal to the weight of debt.   debt-equity ratio is equal to 1.

While computing the weighted average cost of capital, the   is the better alternative when the market value is not readily available.

In capital budgeting analysis, when computing the weighted average cost of capital, the CAPM approach is typically used to find the component cost of which type of capital? Internal equity.   Preference shares. All of these.

You are given the following two equations:SML: E(Ri) = Rf + (E(RM) − Rf )βi (1)CML: E(Rp) = Rf +E(RM) − RfσMσp (2)You also have the following information: E(RM) = .15, Rf = .06, σM = .15. Answerthe following questions, assuming that the capital asset pricing model is correct:(a) Which equation would you use to determine the expected return on an individualsecurity with a standard deviation of returns σ = .5 and a β = 2? Given theparameters above, what is the expected return for that security?(b) Which equation would you use to determine the expected return on a portfolioknowing that it is an efficient portfolio (consisting of the market portfolio Mcombined with the risk-free rate)? If you were told that the standard deviationof returns on that efficient portfolio is equal to σM and you were given the aboveparameters, what is the expected return on that portfolio?(c) Can you determine the β of the portfolio in (b)?(d) Given your answers above, expand on what type of risky assets…

Capital gain yield (CGY) can be either positive or negative.   Select one: True False

A firm's overall cost of capital is Select one :. A. Best measured by the cost of capital of the riskiest projects that the firm is working on B. a weighted average of the costs of capital for the collection of individual projects that the firm is working on C. equal to its cost debt d. None of these

Explain the Leverage and the Incremental Cost of Debt with example?

An Aggressive Working Capital policy has the following characteristics:   A. Low current assets and high current liabilities and a high current   ratio   B. High long-term loans, low investment in inventory and high debt ratio   C. High levels of investment in inventory and debtors and a high current ratio.   D. Low levels of investment in inventory and debtors and a low current ratio.

What capital budgeting rule is a simple but imperfect attempt to solve the capital rationing problem?  a The profitability index  b The accounting rate of return  c The payback rule  d The internal rate of return  e The net present value rule

The value of a firm is maximized when the:   Multiple Choice   tax rate equals the cost of capital.   weighted average cost of capital is minimized.   cost of equity is maximized.   levered cost of capital is maximized.   debt-equity ratio is minimized.