o. borrowing might lever up the return on common equity when: A) the cash rom issuing debt is invested earn at a rate equal the borrowing cost B) the cash from C) the cash from issuing D) borrowing has no effect on the return on common equity. 7. Which of the following statements is of the debt cost of the debt cost of the debt tg debt is inivested cam at a rate greater than the borrowing ege ssuing debe is invested can at a rate lower than the borrowing equals A. Net operating profit margin divided by net operating asset turnover B. Return on net operating assets can be disaggregated into net operatinjg return on net operating assets profit margin and leverage C. Return on equity equals return on net operating assets less interest, net of tax D. Return on equity can be disaggregated into net operating profit margin, net operating asset turnover and leverage. 8The residual income model defines stock price as book value plus the present value of residual income. What is the effect on stock price in a given period if the firm's cost of capital is greater than its return on equity? A. Cannot be determined B. No effect C. Stock price increases D. Stock price decreases 9. If a company is to successfully remain in business over the long haul, which of the following statements is most correct? A. Total cash flow from operations, measured over an extended period, must be greater than zero B. Total cash flow from investing, measured over an extended period, must be positive C. Total cash flow from financing, measured over an extended period, should be negative D. Total cash flow from financing plus total cash flow from investing, measured over an extended period, must be positive