McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Master of Business Administration (MBA) .
Chapters
| 51. |
Which one of the following is a correct statement regarding a firm's weighted average cost of capital (WACC)? |
| A. | An increase in the market risk premium will tend to decrease a firm's WACC. |
| B. | A reduction in the risk level of a firm will tend to increase the firm's WACC. |
| C. | A 5 percent increase in a firm's debt-equity ratio will tend to increase the firm's WACC. |
| D. | The WACC can be used as the required return for all new projects with similar risk to that of the existing firm. |
| Answer» D. The WACC can be used as the required return for all new projects with similar risk to that of the existing firm. | |
| 52. |
Capital structure weights are based on the: |
| A. | market values of a firm's debt and equity. |
| B. | market value of a firm's equity and the face value of its debt. |
| C. | initial issue values of a firm's debt and equity. |
| D. | book value of a firm's debt and equity. |
| Answer» A. market values of a firm's debt and equity. | |
| 53. |
Which one of the following represents the best estimate for a firm's pre-tax cost of debt? |
| A. | the current yield-to-maturity on the firm's existing debt |
| B. | the firm's historical cost of capital |
| C. | twice the rate of return currently offered on risk-free securities |
| D. | the current coupon on the firm's existing debt |
| Answer» A. the current yield-to-maturity on the firm's existing debt | |
| 54. |
A project may be regarded as high risk project when |
| A. | It has smaller variance of outcome but a high initial investment |
| B. | It has larger variance of outcome and high initial investment |
| C. | It has smaller variance of outcome and a low initial investment |
| D. | It has larger variance of outcome and low initial investment |
| Answer» A. It has smaller variance of outcome but a high initial investment | |
| 55. |
Following is (are) the method(s) for adjustment of risks |
| A. | Risk-adjusted Discounting Rate |
| B. | Risk Equivalence Coefficient Method |
| C. | Both (A) and (B) |
| D. | None of the above |
| Answer» C. Both (A) and (B) | |
| 56. |
With limited finance and a number of project proposals at hand, select that package of projects which has |
| A. | The maximum net present value |
| B. | Internal rate of return is greater than cost of capital |
| C. | Profitability index is greater than unity |
| D. | Any of the above |
| Answer» A. The maximum net present value | |
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