In a traditional approach, which of the following statement is true in the context of the average cost of capital?
A. It remains constant up to a degree of leverage and rises sharply thereafter with every increase in leverage
B. It rises constantly with an increase in leverage
C. It decreases up to a certain point, remains unchanged for a moderate increase in leverage, and rises beyond a certain point
D. It decreases at an increasing rate with an increase in leverage
Answer: Option C
The appropriate ratio for indicating liquidity crisis is
A. Operating ratio
B. Sales turnover ratio
C. Current ratio
D. Acid test ratio
A. Net present value method
B. Internal rate of return method
C. Profitablity index method
D. None of the above
A. a-4, b-3, c-1, d-2
B. a-3, b-4, c-1, d-2
C. a-4, b-3, c-1, d-2
D. a-3, b-2, c-4, d-1
Which one of the following assumptions is not included in the James E. Walter Valuation model?
A. All financing by retained earnings only
B. No change in the key variables such as EPS and DPS
C. The firm has finite life
D. All earnings are either distributed as dividends or invested internally immediately
Join The Discussion