Which of the following statements about Capital Asset Pricing Model (CAPM) equation “E(RA) = Rf + ?A … Show more Which of the following statements about Capital Asset Pricing Model (CAPM) equation “E(RA) = Rf + ?A(E(RM) – Rf) ” is true ______ E(RA) is the required rate of return for stock A. Rf is the real risk-free rate. E(RM) is the required rate of return on the individual security. ?A is the beta coefficient for the market portfolio. The cost of equity is the rate of return the marginal stockholder requires on the firm’s common stock._____ True. False M&M Proposition I, with taxes, states that the value of a levered (VL) firm is equal to. _______ VU + (TC × D) VU – (TC × D) VU ÷ (TC × D) None of the above is correct To estimate the cost of capital, you have been provided with the following data: rRF = 5.00%; the market return is 11.00%; and Beta = 1.0. Based on the CAPM approach, what is the cost of equity? ________ 5.0% 6.0% 10.4% 11.0% Assume that you have been provided with the following data: D1 = $1.30; P0 = $42.50; and g = 5.0% (constant). What is the cost of equity based on the Dividend Growth Model? ________ 8.06% 10.06% 11.41% 12.0% Suppose we have a bond issue currently outstanding that has 25 years left to maturity. The coupon rate is 9% and coupons are paid annually. The bond is currently selling for $968.72 per $1,000 bond. What is the before-tax cost of debt (YTM)? 5.00% 9.33% 10.0% 9.00% Based on the information from Above, if the firm’s marginal tax rate is 20%. What’s the firm’s after-tax cost of debt?________ 3.58% 5.08% 6.32% A firm sells 15,000 desks a year at an average price per desk of $200. The carrying cost per unit is $2.80. The company orders 200 doors at a time and has a fixed order cost of $45 per order. The desks are sold out before they are restocked. What is the economic order quantity? ________ 482 desks 694 desks 804 desks 919 desks 7.46% • Show less