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1. The cost of capital is also known as the "hurdle rate".
True
False
2.
The constant dividend growth model and CAPM are two ways of estimating a firm's cost of equity.
True
False
3.
The cost of capital uses the amounts of total assets and debt as the capital structure weights.
True
False
4.
In deriving the WACC, market values are preferred over book values for the capital structure weights.
True
False
5.
Ceteris
paribus ,
projects with lower than average risk should be evaluated using a higher than average WACC.
True
False
6.
Ceteris paribus, a lower tax rate would result in a higher WACC.
True
False
7.
An unlevered firm is an all-equity firm.
True
False
8.
When estimating the cost of debt financing from bonds, a firm can use the
yieldminustominusmaturity
as the
beforeminustax
cost of debt.
True
False
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