答案和详解如下： 1.Enamel Manufacturing (EM) is considering investing in a new vehicle. EM finances new projects using retained earnings and bank loans. This new vehicle is expected to have the same level of risk as the typical investment made by EM. Which one of the following should the firm use in making its decision? A) After-tax cost of debt. B) Marginal cost of capital. C) Cost of retained earnings. D) Cost of preferred stock. The correct answer was B) The marginal cost of capital represents the cost of raising an additional dollar of capital. Preferred stock is not a method of financing for the company. The cost of retained earnings would only be appropriate if the company avoided creditor-supplied financing or the issuance of new common or preferred stock (and preferred stock financing). The after-tax cost of debt is never sufficient, because a business, regardless of their size, always has a residual owner, and hence a cost of equity. 2.Which one of the following statements about the marginal cost of capital (MCC) is TRUE? A) The MCC is the cost of the last dollar obtained from bondholders. B) The MCC is the cost of the last dollar obtained from shareholders. C) The breakpoint on the marginal cost curve is calculated by dividing retained earnings by the equity weight in the capital structure. D) The MCC falls as more and more capital is raised in a given period. The correct answer was C) The marginal cost of capital (MCC) is defined as the weighted average cost of the last dollar raised by the company. Typically, the marginal cost of capital will increase as more capital is raised by the firm. The marginal cost of capital is the weighted average rate across all sources of long-term financings – bonds, preferred stock, and common stock – when the final dollar was obtained, regardless of its specific source. 3.The marginal cost of capital is: A) the cost of the last dollar raised by the firm. B) tied solely to the specific source of financing. C) equal to the current yield on money market funds. D) equal to the firm's weighted cost of funds. The correct answer was A) The “marginal” cost refers to the last dollar of financing acquired by the firm assuming funds are raised in the same proportion as the target capital structure. It is a percentage value based on both the returns required by the last bondholders and stockholders to provide capital to the firm. Regardless of whether the funding came from bondholders or stockholders, both debt and equity are needed to fund projects. Money market fund yields are tied to low-risk, short-term investments and are not relevant. | 
发表于 2008-4-8 10:16
|