If a company’s beta increases,

If a company’s beta increases, this will increase the cost of equity used to calculate the WACC, but only if the company does not have enough retained earnings to take care of its equity financing and hence must issue new stock. *

A) True

B) False

2-

If a company’s tax rate increases but the YTM on its noncallable bonds remains the same, the after-tax cost of its debt will fall. *

A) True

B) False

3-

The NPV and IRR methods may give different recommendations regarding which of two mutually exclusive projects should be accepted, but they always give the same recommendation regarding the acceptability of a normal, independent project. *

A) True

B) False

4-

The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the IRR. *

A) True

B) False

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