Question 77

When evaluating the qualifications of a board member, which of the following is least likely to be considered a positive factor? The board member:

A)    has board membership in excess of 10 years.

B)   regularly attends meetings.

C)   has made public statements regarding his ethical positions.

D)   has experience on other boards.

Question 78

Which of the following is most accurate regarding the component costs and component weights in a firm’s weighted average cost of capital (WACC)?

A)    The dividend exclusion for corporate investments in preferred stock reduces the after-tax cost of preferred stock.

B)   The weights in the WACC should be based on the book values of the individual capital components.

C)   The appropriate pre-tax cost of a firm’s new debt is the average coupon rate on the firm’s existing debt.

D)   Taxes reduce the cost of debt for firms in countries in which interest payments are tax deductible.

[此贴子已经被作者于2008-11-8 9:41:23编辑过]

答案和详解如下！

Question 77

When evaluating the qualifications of a board member, which of the following is least likely to be considered a positive factor? The board member:

A)    has board membership in excess of 10 years.

B)   regularly attends meetings.

C)   has made public statements regarding his ethical positions.

D)   has experience on other boards.

The correct answer was A) has board membership in excess of 10 years.

While board membership in excess of 10 years may add experience, it also may indicate a board member who has developed an unhealthy alliance with management.

This question tested from Session 11, Reading 48, LOS d

Question 78

Which of the following is most accurate regarding the component costs and component weights in a firm’s weighted average cost of capital (WACC)?

A)    The dividend exclusion for corporate investments in preferred stock reduces the after-tax cost of preferred stock.

B)   The weights in the WACC should be based on the book values of the individual capital components.

C)   The appropriate pre-tax cost of a firm’s new debt is the average coupon rate on the firm’s existing debt.

D)   Taxes reduce the cost of debt for firms in countries in which interest payments are tax deductible.

The correct answer was D) Taxes reduce the cost of debt for firms in countries in which interest payments are tax deductible.

The after-tax cost of debt = k_d(1 – t) = k_d – k_d(t), where k_d is the pretax cost of debt and t is the effective corporate tax rate. So the tax savings from the tax treatment of debt is k_d(t). The dividend exclusion for corporate holders of preferred stock may be beneficial to the investing firm, not the issuing firm. Capital component weights should be based on market weights, not book values. And, the appropriate pre-tax cost of debt is the yield to maturity on the firm’s existing debt.

This question tested from Session 11, Reading 45, LOS f

Question 79

The graph below combines the efficient frontier with the indifference curves for two different investors, X and Y (represented by U(X) and U(Y)). The letters A, B, C, and D represent four

Which of the following statements about the above graph is most accurate?

A)    Investor X would be better off moving to indifference curve U(X)1 and Portfolio C because of the higher return on that portfolio.

B)   Investor X is less risk-averse than Investor Y.

C)   The backward bend in the efficient frontier is due to less than perfect correlation between portfolio assets.

D)   Portfolio B is an optimal portfolio, Portfolio A is suboptimal.

Which of the following statements about the above graph is most accurate?

A)    Investor X would be better off moving to indifference curve U(X)1 and Portfolio C because of the higher return on that portfolio.

B)   Investor X is less risk-averse than Investor Y.

C)   The backward bend in the efficient frontier is due to less than perfect correlation between portfolio assets.

D)   Portfolio B is an optimal portfolio, Portfolio A is suboptimal.

[此贴子已经被作者于2008-5-10 15:51:51编辑过]

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