APU FINC600 Week 8 Quiz (2016 Version)/Verified Answer/All correct/Score 100%

APU FINC600 Week 8 Quiz (2016 Version)



Question 1 of 25

The firm's internal growth rate is defined as:

A. retained earnings/net income

B. retained earnings/net assets

C. retained earnings/total assets

D. none of the above

Question 2 of 25

Briefly describe the traditional position on capital structure.

The cost of capital is the most famous and divisive theories in financial management. The

traditional view of capital structure theory, based on observation and perception, suggests that

an best capital structure exists. It lessens a weighted average cost of capital firm’s (WACC) and

therefore raise s its value. Most importantly the finance decision is appropriate to a

organizations value as the investment decision. It suggests that, given market deficiencies, and

the weighted average cost of capital (WACC) is exaggerated by changes in the gearing level in

the company

Question 3 of 25

Minimizing the weighted average cost of capital (WACC) is the same as:

A. Maximizing the market value of the firm

B. Maximizing the book value of the firm

C. Maximizing the profits of the firm

D. Maximizing the liquidating value of the firm