37. When should short-term debt be included when calculating WACC?

a.

Always

b.

Only for a private company

c.

Only for a public, listed company

d.

Never

40. Which is of the following are reasons why financing a business through borrowing is cheaper than using equity?

a.

Lenders require a lower rate of return than ordinary shareholders.

b.

Issuing and transaction costs associated with raising and servicing equity generally less than for ordinary shares.

c.

Debt financial securities present lower costs than shares because they have prior claims on annual income and in liquidation.

d.

Debt interest cannot be offset against pre-tax profits before calculating the corporation tax bill, thus, reducing the tax paid

46. A company has many positive NPV projects to fund but pays all of its profits as dividends. How could it continue to create shareholder wealth in Miller and Modiglianis perfect world?

a.

By issuing shares, knowing that investors would willingly pay a fair price for them

b.

By issuing shares at low prices so that investors would pay for them

c.

By not paying dividends in future years

d.

By forgoing the projects