Financial Management - Study Mode

[#991] A formula of after-tax component cost of debt is
Correct Answer

(A) interest rate-tax savings

Explanation

Solution: A formula of after-tax component cost of debt is interest rate-tax savings. Cost of debt refers to the effective rate a company pays on its current debt. In most cases, this phrase refers to after-tax cost of debt, but it also means the company's cost of debt before taking taxes into account.

[#992] Risk free rate is subtracted from expected market return is considered as
Correct Answer

(C) equity risk premium

Explanation

Solution: Risk free rate is subtracted from expected market return is considered as equity risk premium. Equity risk premium refers to the excess return that investing in the stock market provides over a risk-free rate.

[#993] Type of variability in which a project contributes in return of company is considered as
Correct Answer

(D) Both B and C

Explanation

Solution: Type of variability in which a project contributes in return of company is considered as variable risk and within firm risk.

[#994] Rate of required return by debt holders is used for estimation the
Correct Answer

(A) cost of debt

Explanation

Solution: Rate of required return by debt holders is used for estimation the cost of debt. Cost of debt refers to the effective rate a company pays on its current debt. In most cases, this phrase refers to after-tax cost of debt, but it also means the company's cost of debt before taking taxes into account.

[#995] A project whose cash flows are more than capital invested for rate of return then net present value will be
Correct Answer

(A) positive

Explanation

Solution: A project whose cash flows are more than capital invested for rate of return then net present value will be positive.