Please answer sections C-E from Question 11

C. A company has a total market value of $100 million, 30 million of which is short term debt. The cost of the short term debt was 4.5%. The company has a marginal tax rate of 40%.

1. 30.1%

2. 4.5%

3. 1.35%

4. 0.81%

D. Which advantage does the gordon growth model have compared to the capital asset pricing model (capm)?

1. It provides an easier to understand and relatively accurate forecast when growth rates are stable

2. It requires the use of accurate known traders, such as future growth rates

3. It is highly accurate in predicting future growth

4. It requires assumptions about growth that benefit fast growing companies

E. How does weighted average cost of capital affect a companies growth opportunities?

1. The lower the cost of capital, the greater the growth opportunities

2. The lower the cost of capital, the lower the growth opportunities

3. Only the cost of debt will affect growth opportunities

4. The higher the cost of capital, the greater the growth opportunities