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Weighted Average Cost Quiz

A project costs $14.7 million and is expected to produce cash flows of $4 million a year for 15 years. The opportunity cost of capital is 20%. If the firm has to issue stock to undertake the project and issue costs are $1 million, what is the project's APV?

The method to determine the net present value for an all equity firm

The APV method to value a project should be used:

The after-tax weighted average cost of capital is determined by:

A firm has a total value of $1 million and debt valued at $400,000. What is the after-tax weighted average cost of capital if the after tax cost of debt is 12% and the cost of equity is 15%?

Which of the following statements characterize(s) the weighted average cost of capital formula?

The cost of common equity for a firm is

The Simplex Co. has an equity cost of capital of 17%. The debt to equity ratio is 1.5 and a cost of debt is 11%. What is the cost of equity if the firm was unlevered? (Assume a tax rate of 33%)

The DRD Company has a debt equity ratio of 1.5. The cost of debt is 11% and the unlevered equity is 14%. Calculate the weighted average cost of capital for the firm if the tax rate is 33%.

The MFC Corporation has decided to build a new facility. The cost of the facility is estimated to be $12.5 million. MFC wishes to finance this project using its traditional debt-to-equity ratio of 1.5. The issue cost of equity is 6% and the issue cost of debt is 1%. What is the total floatation cost of raising funds?

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