Reference no: EM132962669

Questions -

Q1) The coupon rate on an issue of debt is 8%. The yield to maturity on this issue is 10%. The corporate tax rate is 21%. What would be the approximate after-tax cost of debt for a new issue of bonds?

a) 3.14

b) 5.28

c) 7.9

d) 2.48

Q2) Within the capital asset pricing model

a) Dividends are considered in the calculations.

b) the higher the beta, the lower the required rate of return

c) beta measures the volatility of an individual stock relative to a stock market

d) the risk-free rate is usually higher than the return in the market

Q3) Stone Inc. is evaluating a project with an initial cost of $9,500. Cash inflows are expected to be $1,500, $1,500, and $10,000 in the three years over which the project will produce cash flows. If the discount rate is 6%, what is the net present value of the project?

a) $26,930

b) $11,150

c) $1,650

d) $8,430