Q1. At the meeting Haggerty made the following statements about the company’s WACC: Statement 1: A company creates value by producing a higher return on its assets than the cost of financing those assets. As such, the WACC is the cost of financing a firm’s assets and can be viewed as the firm’s opportunity cost of financing its assets. Statement 2: Since a firm’s WACC reflects the average risk of the projects that make up the firm, it is not appropriate for evaluating all new projects. It should be adjusted upward for projects with greater-than-average risk and downward for projects with less-than-average risk. Are Statement 1 and Statement 2, as made by Haggerty CORRECT? Statement 1 Statement 2
A) Correct Incorrect B) Correct Correct C) Incorrect Correct
Q2. Which of the following choices best describes the role of taxes on the after-tax cost of capital in the U.S. from the different capital sources? Common equity
Preferred equity Debt
A) No effect No effect Decrease B) No effect Decrease Decrease C) Decrease Decrease No effect
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发表于 2009-1-22 09:37
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