Corporate Finance 10th Edition test bank ch18

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1、ch18Student:___________________________________________________________________________1.Theflow-to-equity(FTE)approachincapitalbudgetingisdefinedtobethe:A.discountingallcashflowsfromaprojectattheoverallcostofcapital.B.scaleenhancingdiscountprocess.C.discountingoftheleveredcashflowstoth

2、eequityholdersforaprojectattherequiredreturnonequity.D.dividendsandcapitalgainsthatmayflowtoshareholdersofanyfirm.E.discountingoftheunleveredcashflowsofaprojectfromaleveredfirmattheWACC.2.TheacronymAPVstandsfor:A.appliedpresentvalue.B.all-purposevariable.C.acceptedprojectverified.D.adju

3、stedpresentvalue.E.appliedprojectedvalue.3.Ifaproject'sdebtlevelisknownoverthelifeoftheproject,oneshoulduseA.WACC.B.APV.C.FTE.D.IRR.E.Noneofthese.4.Discountingtheunleveredaftertaxcashflowsbythe_____minusthe______yieldsthe________.A.costofcapitalfortheunleveredfirm;initialinvestment;adju

4、stedpresentvalueB.costofequitycapital;initialinvestment;projectNPVC.weightedcostofcapital;fractionalequityinvestment;projectNPVD.costofcapitalfortheunleveredfirm;initialinvestment;all-equitynetpresentvalueE.Noneofthese5.Theacceptanceofacapitalbudgetingprojectisusuallyevaluatedonitsownme

5、rits.Thatis,capitalbudgetingdecisionsaretreatedseparatelyfromcapitalstructuredecisions.Inreality,thesedecisionsmaybehighlyinterwoven.Thismayresultin:AfirmsrejectingpositiveNPV,allequityprojectsbecausechangingtoacapitalstructurewithdebtwill.alwayscreatenegativeNPV.B.neverconsideringcapit

6、albudgetingprojectsontheirownmerits.Ccorporatefinancialmanagersfirstcheckingwiththeirinvestmentbankerstodeterminethebesttypeof.capitaltoraisebeforevaluingtheproject.DfirmsacceptingsomenegativeNPVallequityprojectsbecausechangingthecapitalstructureadds.enoughpositiveleveragetaxshieldvalue

7、tocreateapositiveNPV.E.firmsneverchangingthecapitalstructurebecauseallcapitalbudgetingdecisionswillbesubsumedbycapitalstructuredecisions.6.TheAPVmethodiscomprisedoftheallequityNPVofaprojectandtheNPVoffinancingeffects.Thefoursideeffectsare:A.taxsubsidyofdividends,costofissuingne