Question 1
The opportunity cost associated with the firm's capital investment in a project is called its
◦ cost of capital.
◦ beta coefficient.
◦ capital gains yield.
◦ sunk cost.
◦ internal rate of return.
Question 2
The overall cost of capital for a retail store
◦ is equivalent to the after-tax cost of the firm's liabilities.
◦ should be used as the required return when analyzing a potential acquisition of a wholesale distributor.
◦ reflects the return investors require on the total assets of the firm.
◦ remains constant even when the debt-equity ratio changes.
◦ is unaffected by changes in corporate tax rates.