direct bankruptcy. The explicit costs, such as legal and administrative expenses, associated with corporate default are classified as _____ costs. represented by. Based upon analysis of firms with similar projects, KT has determined that an unlevered cost of equity of 12% is suitable for their project. Learn more about the weighted average cost of capital and see why firms unlever and re-lever beta to compare debt and equity financing costs. The unlevered cost of capital for Armadillo Industries is closest to: A) 10.3% B) 10.1% C) 9.5% D) 9.9% This E-mail is already registered as a Premium Member with us. Corporate Finance MCQ Corporate Finance The unlevered cost of capital is the appropriate discount rate for ITS when the level of debt will remain the same. B) the maximum return a project can earn. Solution for cost of debt 8% unlevered cost of capital 10% systematic risk of asset 1.5 1) Unlevered Firm Levered Firm EBIT… The primary purpose of portfolio diversification is to:  A. increase returns and risks. This E-mail is already registered with us. If the answers is incorrect or not given, you can answer the above question in the comment box. If the answers is incorrect or not given, you can answer the above question in the comment box. Cost of equity capital is acknowledged as the rate of return that is necessary to satisfy commitments made to the common shareholders of a corporation.Generally, it is expected to be equal to the rate of return that is expected on equity-supplied capital. The cost of capital is A) the minimum return that a capital budgeting project must earn for it to be accepted. Kindly login to access the content at no cost. C) the return that a previous project for the firm had earned. For example, a company with an unlevered beta of 0.95 would have an unlevered cost of capital of 11.2 percent when the risk-free rate is 3.6 percent and the market risk premium is … There is no change in the amount of capital reserve before and after issue of bonus share of the issue is made from out of pre-acquisition profit. Unlevered Cost Of Capital An evaluation that uses either a hypothetical or actual debt-free scenario when measuring the cost to a firm to implement a particular capital project. Unlevered cost of capital is a term that is used in reference to a system for the analysis of the cost of a proposed or potential capital project that a company or organization is contemplating. agency cost. The cost of floatation are 2%. 13) If KT expects to maintain a debt to equity ratio for this project of .6 then KT's project based WACC. D) none of the above. the interest tax shield times pretax net income. Direct bankruptcy. "Financial Management MCQ" with answers helps with fundamental concepts for self-assessment with theoretical, analytical, and distance learning. Which one of the following is least apt to reduce the unsystematic risk of a portfolio? c. new product Financial Management MCQ Quiz & Online Test: Below is few Financial Management MCQ test that checks your basic knowledge of Financial Management abilities.This Financial Management Quiz & Online Test contains questions 40 of multiple choice with 4 … the cost of preferred stock for a firm with equal parts debt … Answer: A institutional cost. I know this isn't really where you're supposed to ask these questions, but i'm kind of desperate at the moment. D) 9.5% Use the information for the question(s) below. … B) 9.9%. C) the return that a previous project for the firm had earned. The unlevered cost of capital for Bavarian Brew is 15% and its cost of equity is 19.05%. Beta and Cost of Capital of a Project When estimating the cost of equity using the Capital Asset Pricing Model (CAPM), it is essential that a reliable estimate of beta is used. Ra equals return on assets, which is the same as unlevered cost of capital. www.gtu-mcq.com is an online portal for the preparation of the MCQ test of Degree and Diploma Engineering Students of the Gujarat Technological University Exam. Our Experts can answer your tough homework and study questions. A single, overall cost of capital is often used to evaluate projects because: a. Assuming a debt equity ratio of .45 what is the company's cost of debt? ASWDC (App, Software & Website Development Center) Darshan Institute of Engineering & Technology (DIET) If the answers is incorrect or not given, you can answer the above question in the comment box. 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