Average cost of capital should simply use cost of that debt

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Reference no: EM132056635

1. A market-value index:

A) is calculated such that the proportion of the index a stock represents is determined by its proportion of the total market capitalization of all stocks in the index.

B) is calculated as the average price of all the stocks in the index that trade that day, one example is the NASDAQ.

C) is calculated like the Dow Jones Average, from the stock prices in the average.

D) is calculated based on the profits generated by the companies in the index.

2. A portfolio generates an annual return of 18%, a beta of 0.6 and a standard deviation of 15%. The market index return is 15% and has a standard deviation of 24%. What is the M2 measure of the portfolio if the risk free rate is 9%?

30.98%

23.65%

8.40%

40.18%

3. If an MNC plans to use a government subsidized loan equal to 100% of the cost of a project, the weighted average cost of capital should simply use the cost of that debt. (True or False?)

4. The APV model discounts each term by the same, optimal weighted average cost of capital.(True or False?)

Reference no: EM132056635

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