Financial capital is equally split between debt and equity

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Reference no: EM132030337

1. A project has a net present value of -$500,000. Which one of the following best describes this project?

The project has no positive cash flows.

The projects present value of all future cash flows is less than its intital cost.

The project's cash inflows equal its cash outflows in current dollar terms (present value).

The project has a negative required rate of return.

2. A firm has bonds outstanding with a coupon rate of 5% and a current yield to maturity of 5.25%. The firm's tax rate is 30%. The firm also has common stock outstanding with a beta of 1.15. The expected return of the market is 8.50% and the risk free rate is 2.75%. The firm's total financial capital is equally split between debt and equity. What is the firm's Weighted Average Cost of Capital?

7.93% 6.72% 6.52% 7.31%

Reference no: EM132030337

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