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Question 7 (1 point) The weighted average cost of capital reflects the average cost of the...

Question 7 (1 point) The weighted average cost of capital reflects the average cost of the various sources of financing that a firm uses to support its assets. True False

Question 8 (1 point) Total risk, which is measured by beta, can be lowered by adding more stocks to a portfolio. True False

Question 9 (1 point) The after tax cost of debt is equal to one minus the tax rate multiplied by the yield on outstanding debt. True False

Question 10 (1 point) Straight-line voting method is preferred by minority shareholders. True False

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Answer #1

7.The weighted average cost of capital reflects the average cost of the various sources of financing that a firm uses to support its assets.

True

WACC = WdCd(1 -t) + WeCe

8.Total risk, which is measured by beta, can be lowered by adding more stocks to a portfolio.

False

Beta measues only systematic risl

9.The after tax cost of debt is equal to one minus the tax rate multiplied by the yield on outstanding debt.

True

After-tax cost of debt = (1 - t)YTM

10.Straight-line voting method is preferred by minority shareholders.

True

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