Q Financial Analys ??| ? ? Find on page Home -LookingQuiz: Exam X Consider Two P

Question

Q Financial Analys ??| ? ? Find on page Home -LookingQuiz: Exam X Consider Two P C Chegg Study | C A Firm Is Consic Finance Archive C Home | Chegg. fù ?https://nmsu.instructure.com/courses/1156550/quizzes/1883847/take m???? NO results ? ? Options ? as a Question 22 4 pts STATE As a firm's WACC decreases, the NPV of a firm's capital investment projects will: O increase O not change O decrease Question 23 4 pts Which of the following will require a tax adjustment in computing a firm's WACC. ? Debt O Common Equity O Preferred Equity O Type here to search 10:17 PM 6/18/2018 20

Explanation / Answer

a) as the weighted average cost of capital decreses, the NPV will increase since the wacc is the cost of raising funds, so when it is low naturally value of firm, ie intrinsic value and net present value rises,

mathematically also tgis is logical since there is inverse relation between NPV ( numerator aspect) and wacc ( denominator aspecy), so lessen denominator produces a hugher numerator.

so logically as well mathematically justified.

b) Debt requires tax adjustment in computing wacc for the firm since interest on dbts is taxable whereas the dividends received on euqity and preference capital are tax free, hence no tax adjustment needed.

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