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Finance

Test 2

QuestionAnswer
If the required return is less than the coupon Rate, a bond well sell at a premium
Beta is used to estimate market risk True
Given no change in required returns, the price of a stock whose dividend is constant will remain unchanged
The principle of diversification tells us that Spreading an investment across many diverse assets will eliminate some of the risk.
An asset characterized by cash flow that increase at a constant percentage rate forever is called a growing perpetuity
Causes the cost of equity, RE, to increase Financial Risk
As the dollar volume of financing needs to increase, the cost of the various types of financing will eventually, blank, blank, the firm's weighted average cost of capital Increase, raising
NPV vs IRR NPV assumes the cash flows will be reinvested at the WACC while the IRR method assumes reinvestment at the IRR
NPV of a project Measures the dollar change in a shareholder wealth if a project is accepted
Increase in yield equals Decrease in bond prices
Decrease in yield Increase in bond prices
Change in variable or fixed cost (operating costs) due to project Incremental Operating costs
Costs associated with the initial issuance of common stock, debt, and preferred stock Floatation expense
Historical costs minus accumulated depreciation Book value
Overall percentage cost to the firm for all its investment capital WACC
Created by: proskiar
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