With respect to issues related to the cost of capital: Multiple Choice an increase in the debt ratio will result in greater risk for debt holders but not equity holders. the cost of capital is the return a firm must earn before tax to satisfy security holders. the WACC is the correct discount rate for average-risk projects. the expected return on equity is relevant to capital budgeting decisions.

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
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With respect to issues related to the cost of capital:
Multiple Choice
an increase in the debt ratio will result in greater risk for debt holders but not equity holders.
the cost of capital is the return a firm must earn before tax to satisfy security holders.
the WACC is the correct discount rate for average-risk projects.
the expected return on equity is relevant to capital budgeting decisions.
Transcribed Image Text:With respect to issues related to the cost of capital: Multiple Choice an increase in the debt ratio will result in greater risk for debt holders but not equity holders. the cost of capital is the return a firm must earn before tax to satisfy security holders. the WACC is the correct discount rate for average-risk projects. the expected return on equity is relevant to capital budgeting decisions.
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