Solution-Net debt-equity ratio, Two companies having the

Net debt-equity ratio

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Which are below Statements are correct:

Two companies having the same Net Debt/Equity ratio and offering the same average returns in different states of the economy have the same β.
The CAPM formula aims at computing the Cost of equity in a given company.
β covers the idiosyncratic risk.
β covers the market risk.
The After-tax cost of debt is necessarily higher than the interest rate offered to the company by the bank.
β emphasizes how sensitive the returns of a given stock are as compared to a well-diversified portfolio of shares.
The higher the risk, the higher the β, the higher the WACC and the lower the present value of future cash flows.

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Net debt-equity ratio

Reference no: EM132466215

Reference no: EM132466215

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