公司理财精要第十二章题库.doc

Chapter 12 Cost of Capital ? Multiple Choice Questions? 1.?Katie owns 100 shares of ABC stock. Which one of the following terms is used to refer to the return that Katie and the other shareholders require on their investment in ABC??A.?Weighted average cost of capitalB.?Pure play costC.?Cost of equityD.?Subjective costE.?Cost of debt ? 2.?Lester lent money to The Corner Store by purchasing bonds issued by the store. The rate of return that he and the other lenders require is referred to as the:?A.?pure play cost.B.?cost of debt.C.?weighted average cost of capital.D.?subjective cost.E.?cost of equity. ? 3.?The weighted average cost of capital is defined as the weighted average of a firms:?A.?return on its investments.B.?cost of equity and its aftertax cost of debt.C.?pretax cost of debt and equity securities.D.?bond coupon rates.E.?dividend and capital gains yields. ? 4.?Farmers Supply, Inc. is considering opening a clothing store, which would be a new line of business for the firm. Management has decided to use the cost of capital of a similar clothing store as the discount rate that should be used to evaluate this proposed expansion. Which one of the following terms is used to describe the approach Farmers Supply is taking to establish an appropriate discount rate for the project??A.?Equity approachB.?Aftertax approachC.?Subjective approachD.?Market playE.?Pure play approach ? 5.?Kate is the CFO of a major firm and has the job of assigning discount rates to each project that is under consideration. Kates method of doing this is to assign an incrementally higher rate as the risk level of the project increases over that of the current firm. Likewise, she assigns lower rates as the risk level declines. Which one of the following approaches is Kate using to assign the discount rates??A.?Pure play approachB.?Divisional ratingC.?Subjective approachD.?Straight WACC approachE.?Equity rating ? 6.?Ted is trying to decide what cost of capital he s