1) According to Michael C. Ehrhardt and Eugene F. Brigham, a good estimate for the market risk premium used in CAPM determination is...
something between 5.0% and 6.0%.
something usually around 7.0%.
about 3.0%.
2) Fake Company Lambda's (FCL) historical stock price movements are almost always more volatile than the overall market's movements. This means that...
the beta for FCL is > 1.0.
the beta for FCL is < 1.0.
CAPM for FCL is > 1.0.
3) Increase the amount of debt in a company’s capital structure will not always lower the company’s WACC because…
rising debt levels will increase the required return on, so the cost of, equity capital.
rising debt levels will increase the company’s market risk premium used in CAPM.
rising debt levels will increase the company’s ROE.
4) For a capital investment project spanning seven years, the appropriate risk-free rate will be…
the yield on a 7-year Treasury note.
the coupon rate on a 7-year Treasury bond.
the yield on a 7-year Treasury bill.