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Author Question: Suppose a firm's stock valuation is worth three times its outstanding debt. The firm's stock earns ... (Read 109 times)

danielfitts88

  • Hero Member
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  • Posts: 535
on: Jul 1, 2018
Suppose a firm's stock valuation is worth three times its outstanding debt. The firm's stock earns an annual return of 6 percent and pays 8 percent on the outstanding debt. What is the firm's company cost of capital?
 
  A) 4.5 percent
  B) 6 percent
  C) 6.5 percent
  D) 8 percent

Question 2

What is the maximum value of the Lerner index?
 
  A) Infinity
  B) 100
  C) Two
  D) One


Natalie4ever

  • Sr. Member
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  • Posts: 335
Reply #1 on: Jul 1, 2018
Answer to Question 1

C

Answer to Question 2

D


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