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92. ADK has 30,000 15-year 9 percent semi-annual coupon bonds outstanding. If the bonds
currently sell for 90 percent of par and the firm pays an average tax rate of 32 percent, what will
be the before-tax and after-tax component cost of debt?
93. An estimated WACC computed using some sort of proxy for the average equity risk of the
projects in a particular business unit is known as the:
94. The ___________ approach to computing a divisional weighted average cost of capital
(WACC) uses the average beta of projects in each division to calculate the WACC.
95. The ____________ approach to computing a divisional weighted average cost of capital
(WACC) requires only that WACCs for "risky" and "relatively safe" divisions be adjusted.
96. Flotation costs are:
97. Which of the following statements is correct?
98. What is the theoretical minimum for the weighted average cost of capital?
99. Which of following is a situation in which you would want to use the CAPM approach for
estimating the component cost of equity?
100. Which of the following is a situation in which you would want to use the constant growth
model approach for estimating the component cost of equity?
101. The reason that we do not use an after-tax cost of preferred stock is:
102. Why do we use market-value weights instead of book-value weights?
103. Suppose a new project was going to be financed partially with retained earnings. What
flotation costs should you use for retained earnings?
104. Which of the following is a reason why the divisional cost of capital approach may cause
problems if new projects are assigned to the wrong division?
105. Which of the following statements is correct?
106. A proxy beta is:
107. Which of the following statements is correct?
108. Which of the following statements is correct?
109. Which of the following statements is correct?
110. Which of the following will increase the cost of equity?
111. Which of the following is most correct?
112. Apple's 9 percent annual coupon bond has 10 years until maturity and the bonds are
selling in the market for $890. The firm's tax rate is 36 percent. What is the firm's after-tax cost
of debt?
113. Apple's 9 percent annual coupon bond has 10 years until maturity and the bonds are
selling in the market for $1,190. If the firm's after-tax cost of debt is 5 percent, what was the
firm's tax rate?
