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those worthy of investment.
UNIT 4 QUIZ
Question 9. Question : The after-tax cost of debt for purposes of
estimating a company's
weighted-average cost of capital:
Student Answer:
Requires an estimate of the yield-to-maturity for long-term
bonds.
Is equal to the pretax cost of debt times t, where t = income
tax rate.
Is equal to the pretax cost of debt ÷ (1 - t), where t = income
tax rate.
Is approximated by the firm's short-term borrowing rate.
Is estimated using the Capital Asset Pricing Model (CAPM).
Question 10. Question : Which one of the following is an
advantage of the payback
method?