If corporate tax rates decreased, what would most likely happen to depreciation tax shields (DTS), operating free cash flows (FCF) and after-tax salvage values (ATSV)? Assume positive NPV projects and MACRS depreciation. A) DTS would increase, FCF would increase and ATSV would decrease B)DTS would increase, FCF would increase and ATSV would decrease. C) DTS would decrease, FCF would decrease and ATSV would increase. D) DTS would decrease, FCF would increase and ATSV would increase. E) DTS would increase, FCF would increase and ATSV would increase.

According to the trade-off theory, the optimal capital structure is the level of debt that O minimizes the financial distress costs. equates the present values of the incremental interest tax shield and the incremental financial distress costs. maximizes the after-tax cash flows that are internally generated. maximizes the present value of the interest tax shield.

Which statement about the cost of capital is incorrect? *     A. If a company’s tax rate increases then, all else equal, its WACC will increase.   B. A company’s target capital structure affects its WACC.   C. WACC calculations is based on the after-tax costs of all individual capital components.   D. Flotation costs can increase the WACC.

You are reviewing a profitable investment project that has a conventional cash flow pattern but the board of directors requires a smaller investment. If the cash flows for the project, initial outlay, and future after-tax cash flows all half, then the IRR would: Stay the same and the NPV would decrease. Decrease and the NPV would decrease. Stay the same and the NPV would stay the same. Increase and the NPV would increase.

If an investment project has a negative net present value (NPV), which one of the following statements about the internal rate of return (IRRT) of this project must be true? Select the correct response: The IRR is negative. The IRR is less than the company's weighted average cost of capital. The IRR is equal to zero. The IRR is greater than the company's weighted average cost of capital.

Which one of the following statements is correct? The net present value is a measure of profits expressed in today's dollars. The net present value is positive when the required return exceeds the internal rate of return. If the initial cost of a project is increased, the net present value of that project will also increase Net present value is equal to an investment's cash inflows discounted to today's dollars.

Mark Which of the following statements is not true about the weighted average cost of capital (WACC) method? O a. WACC adjusts for the tax deductibility of interest costs O b. Average company WACC should not be used for evaluating projects in a multi-segment conglomerate O c. If WACC is greater than the IRR of a project and the cash flows are conventional, then, the NPV of the project will always be less than zero O d. WACC cannot be used to evaluate projects in which the capital structure is significantly different from the firm's overall structure Oe. If WACC is less than IRR of a strip mine project, then, the NPV of the project will always be greater than zero

Could a company’s change in NWC be negative in a given year? (Hint: Yes.) Explain how this might come about. What about net capital spending?

Which of the following statements is CORRECT?   a. WACC calculations should be based on the before-tax costs of all the individual capital components.   b. Flotation costs associated with issuing new common stock normally reduce the WACC.   c. An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.   d. A change in a company's target capital structure cannot affect its WACC.   e. If a company's tax rate increases, then, all else equal, its weighted average cost of capital will decline.

al What is the ditterence between NPV and IRR? Which is the best method corporate companies adapt for capital budgeting of their Projects. If the Discounted Rate of return is Zero what is the value of IRR?( High/low).