公司理财课后习题及答案chapter12estimatingthecostofcapital.pdf

Corporate Finance, 3e (Berk/DeMarzo) Chapter 12 Estimating the Cost of Capital The Equity Cost of Capital Use the following information to answer the question(s) below. Beta Volatility Eenie 20% Meenie 18% Miney 35% Moe 25% Assume that the risk-free rate of interest is 3% and you estimate the markets expected return to be 9%. 1) Which firm has the most total risk A) Eenie B) Meenie C) Miney D) Moe Answer: C Explanation: C) Total risk is measured using volatility and Miney has the highest volatility, hence the most total risk. Diff: 1 Section: The Equity Cost of Capital Skill: Analytical 2) Which firm has the least market risk A) Eenie B) Meenie C) Miney D) Moe Answer: A Explanation: A) Market risk is measured using beta and Eenie has the lowest beta, hence the lowest market risk. Diff: 1 Section: The Equity Cost of Capital Skill: Analytical 3) Which firm has the highest cost of equity capital A) Eenie B) Meenie C) Miney D) Moe Answer: D Explanation: D) Cost of capital is measured using the CAPMand is a linear function of beta. Therefore the firm with the highest beta (Moe) has the highest cost of equity capital. Diff: 1 Section: The Equity Cost of Capital Skill: Analytical 4) The equity cost of capital for Miney is closest to: A) % B) % C) % D) % Answer: C Explanation: C) r Miney = 3% + (9% - 3%) = % Diff: 1 Section: The Equity Cost of Capital Skill: Analytical 5) The equity cost of capital for Meenie is closest to: A) % B) % C) % D) % Answer: B Explanation: B) r Meenie = 3% + (9% - 3%) = % Diff: 1 Section: The Equity Cost of Capital Skill: Analytical 6) The risk premium for Meenie is closest to: A) % B) % C) % D) % Answer