Question 1:

Which statement below best defines the weighted average cost of capital of a firm?

A. Return on all of its investments.

B. Cost of equity, cost of preferred, and its aftertax cost of debt.

C. Pretax cost of debt and its preferred and common equity securities.

D. Bond coupon rates.

E. All of the above.

Question 2:

A pro forma financial statement is a financial statement that:

A. expresses all values as a percentage of either total assets or total sales.

B. compares actual results to the budgeted amounts.

C. compares the performance of a firm to its industry.

D. projects future years' operating results.

E. values all assets based on their current market values.

Question 3

Which one of the following methods of analysis ignores cash flows?

A. Profitability index

B. Payback

C. Average accounting return

D. Modified internal rate of return

E. Internal rate of return