The before-tax cost of debt capital for a firm _______.

• A.is the return that the firm's creditors demand on new borrowing.
• B.can be calculated by looking at the coupon rates on existing bonds of similar risk.
• C.can be estimated by finding the yield on recently issued, longer maturity bonds with a lower bond rating.

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A firm can pursue a differentiation strategy on the basis of
I). its product.
II). method of delivery.
III). economies of scale.
IV). production process.
V. marketing approach.
VI). can charge a higher price while attempting to retain cost parity with its competitors.

• A.I, II, III, V, VI.
• B.All of them.
• C.I, II, V, VI.

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A financial analyst has gathered the following information from balance sheet and income statement of a company:

What is the cash flow from financing activities?

• A.84
• B.212
• C.297

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Which of the following is the best explanation for diseconomies of scale?

• A.coordination problems
• B.indivisibilities
• C.diminishing returns

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A coupon bond with duration of 4.75 has an initial price of par value. A 50 basis point decrease in required return would cause the price of $2,000,000 par value of this bond to:

• A.increase to $2,047,500
• B.increase to $2,095,000
• C.decrease to $1,952,250

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