The Capital Asset Pricing Model.
A) is a way to formulate the cost of capital.
B) is a way to calculate the weighted cost of capital.
C) is a usual model for stock market investing.
D) none of these choices
QUESTION 2Beta is
A) is a measure of the overall market's volatility relative to a specific stock.
B) is equal to the equity premium.
C) a measure of a stocks volatility relative to the market as a whole.
D) none of these choices.
QUESTION 3The cost of capital to a firm is equal to
A) a risk-free rate plus an equity premium.
B) a risk-free interest rate.
C) an equity premium charged by lenders.
D) the Treasury bill rate minus an equity premium.
QUESTION 4Dividends
A) raise after tax net income.
B) are not tax deductible.
C) are tax deductible.
D) have the same tax treatment for the firm as the tax treatment of interest payments.
QUESTION 5The optimum capital structure
A) minimizes the cost of capital only.
B) minimizes the stock price only.
C) minimizes stock price will maximizing the cost of capital.
D) minimizes the costs of capital while maximizing the stock price.
QUESTION 6Capital structure refers to
A) the ratio of equity to debt.
B) the ratio of common stock to preferred stock.
C) the ratio of debt to equity.
D) the ratio of cash to current liabilities
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