I. In capital budgeting, the is the appropriate discount rale to se when ealeula
ID: 2803461 • Letter: I
Question
I. In capital budgeting, the is the appropriate discount rale to se when ealeulating the NPV of a project. A. WACC B. IRR C. cost of debt D. beta E. cost of equity WACC is the average cost of 2. A. IRRs B. Financing sources C. Initial investments D. Rates of return E. Current ratios 3. Kroger's before-tax cost of bond is 9.5 percent. What is the afer tas cost of tond if Kroger's tns rate is 35%? A. 6.38% B. 595% C. 5.53% D. 4.88% E. 6.18% 4. You bought a share of stock for $5 per share. After holding the stock for 9 years, you sold the stock for $42 per share. What is the holding period return and effective annual return on this investment A. B. C. D. E. 881%, 41.63% 740%, 30.48% 740%, 28.43% 881%, 30.48% 740%, 26.68% 5. You bought MedTech Corp stock for $54 per share last year After receiving a 32 per share dividend, you sold the stock for $64 this year. What is your percent return A. 22.22% B. 18.52% C. 30.00% D. 25.00% E. 23.02% 6. Gary bought a share of stock for $15.75 that paid a dividend of s0.45, and sold three months later for $17.35. What was his dollar profit or loss? A. $3.15 B. $3.35 C. $4.15 D. $2.05 E. $3.05 7. IMB Inc. has a 15-year bond selling for $850 and pays a 7 percent coupon semi-annually, What would be IMB's annual before-tax cost of debt (bond), if investment banking fee is S50 A. 8.82% B. 8.15% C. 10.39% D. 9.21% E. 9.53%Explanation / Answer
1. Weighted average cost of capital is the appropriate of discount because it takes into account cost of equity, Cost of Preference shares and Cost of Debt.
Answer A WACC