【導讀】managersand2)creditors.motivatemanagers?A.Poisonpill.D.Threatoffiring.stockholders'bestinterests.C.takeoverthreats.

　　

【正文】 d up, the firm is forced to acquire capital from more and more costly sources. For instance, there will be flotation costs associated with new stock issues. Since ponent capital rates are rising, marginal rates exceed average rates (., the weighted average cost of capital). Question ID: 24952 Which one of the following is likely to be highest? A. Marginal cost of capital. B. Cost of debt. C. Treasury bill rates. D. Weighted average cost of capital. 22 Explanation: Correct answer: A Financial managers seek the cheapest source of financing first. This is typically low interest rate debt or retained earnings. As these cheaper sources are used up, the firm is forced to acquire capital from more and more costly sources. For instance, there will be flotation costs associated with new stock issues. Since ponent capital rates are rising, marginal rates exceed average rates (., the weighted average cost of capital). g: Explain the factors that affect the cost of capital and distinguish between those factors that can and cannot be controlled by the pany. Question ID: 24958 Which one of the following factors that affect the cost of capital can be controlled by a pany? A. The size of the capital budget. B. Government actions. C. The level of interest rates. D. Corporate tax rates. Explanation: Correct answer: A As a firm expands the number of projects it accepts, it has to acquire additional funds. Having used the cheapest sources of financing first, its marginal cost of capital will rise as the firm acquires more costly debt or equity financing. By cutting back on the number of projects it accepts, although perhaps missing out on great opportunities, the firm will be controlling its capital costs. Interest rates, tax rates, and government actions are out of the control of the firm。 although firms decide how to react to changes in these variables. 23 Question ID: 24962 Newmont Filters wants to reduce its cost of capital. Which one of the following events would have the opposite effect? A. Newmont Filters pays a bonus dividend to attract more shareholders. B. Newmont Filters selects less risky projects than it has in the past. C. The Federal Reserve cuts interest rates, resulting in a lower prime lending rate. D. Newmont Filters finances its expansion in line with its target capital structure. Explanation: Correct answer: A At first glance, issuing a bonus dividend might seem to be a good idea, because it might attract a group of shareholders (called a clientele) seeking a higher dividend yield. However, Newmont Filters would consequently have to pay floatation costs as it issued additional shares of mon stock to finance new projects, rather than use less costly retained earnings. Also, issuing the higher dividend increases the percentage of the firm financed with debt, which increases the risk faced by the shareholders. Note that expanding the firm in line with the existing target capital structure will likely keep the cost of capital the same. Question ID: 24960 A pany can control all of the following factors affecting the cost of capital EXCEPT: A. interest rates. B. target capital structures. C. dividend payments. D. investment selection. 24 Explanation: Correct answer: A Interest rates are a function of multiple factors outside the control of the pany, including Federal Reserve decisions and individual savings rates. Up to the point where investors feel endangered by a risk of bankruptcy, borrowing more funds reduces the cost of capital due to less expensive, tax deductible interest. Retaining a higher percentage of profits reduces the need to obtain funds in financial markets and pay related floatation costs. By reducing the number of projects selected, a firm also reduces the need to obtain additional funds. SECTOR QUIZ: : The Cost of Capital Setup Text: ? The pany has a target capital structure of 40 percent debt and 60 percent equity. ? Bonds pay 10 percent coupon (semiannual payout), mature in 20 years, and sell for $. ? The pany stock beta is . ? Risk free rate is 10 percent, and market risk premium is 5 percent. ? The pany is a constant growth firm that just paid a dividend of $, sells for $ per share, and has a growth rate of 8 percent. ? The pany39。s marginal tax rate is 40 percent. Question ID: 17276 The aftertax cost of debt is: A. %. B. %. C. %. D. %. Explanation: Correct answer: C 25 n=40, PMT=50, FV=1000, PV=, Compute i=6%, double=12%, now (12)()=%. Setup Text: ? The pany has a target capital structure of 40 percent debt and 60 percent equity. ? Bonds pay 10 percent coupon (semiannual payout), mature in 20 years, and sell for $. ? The pany stock beta is . ? Risk free rate is 10 percent, and market risk premium is 5 percent. ? The pany is a constant growth firm that just paid a dividend of $, sells for $ per share, and has a growth rate of 8 percent. ? The pany39。s marginal tax rate is 40 percent. Question ID: 17276 The cost of equity using the CAMP approach is: A. %. B. %. C. %. D. %. Explanation: Correct answer: D 10 + (5)()=16%. Setup Text: ? The pany has a target capital structure of 40 percent debt and 60 percent equity. ? Bonds pay 10 percent coupon (semiannual payout), mature in 20 years, and sell for $. ? The pany stock beta is . ? Risk free rate is 10 percent, and market risk premium is 5 percent. ? The pany is a constant growth firm that just paid a dividend of $, sells for $ per share, and has a growth rate of 8 percent. ? The pany39。s marginal tax rate is 40 percent. 26 Question ID: 17276 The cost of equity using the discounted cash flow approach is: A. %. B