Which of the following statement is least likely to be correct? - The WACC is used to find the present value of future cash flows, so it would be inconsistent to use weights based on the past history of the company. - The capital structure weights based on the current market values is a good estimate of the capital structure that the company will have on average during the future. - A company should use the marginal rate when it estimates its WACC. - Suppose a company's previously issued debt isn't trading at par. In that case, the yield to maturity is a good estimate of the return required to satisfy investors. - The firm should earn on its reinvested earnings at least as much as its stockholders could earn on alternative investments of equivalent risk.
Which of the following statement is least likely to be correct? - The WACC is used to find the present value of future cash flows, so it would be inconsistent to use weights based on the past history of the company. - The capital structure weights based on the current market values is a good estimate of the capital structure that the company will have on average during the future. - A company should use the marginal rate when it estimates its WACC. - Suppose a company's previously issued debt isn't trading at par. In that case, the yield to maturity is a good estimate of the return required to satisfy investors. - The firm should earn on its reinvested earnings at least as much as its stockholders could earn on alternative investments of equivalent risk.
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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Transcribed Image Text:Which of the following statement is least likely to be correct?
- The WACC is used to find the present value of future cash flows, so it would be inconsistent to use weights based on the past history of the company.
- The capital structure weights based on the current market values a good estimate of the capital structure that the company will have on average during the
future.
- A company should use the marginal rate when it estimates its WACC.
- Suppose a company's previously issued debt isn't trading at par. In that case, the yield to maturity is a good estimate of the return required to satisfy investors.
- The firm should earn on its reinvested earnings at least as much as its stockholders could earn on alternative investments of equivalent risk.
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