FM_finalexam_concepts - Financial Management BUS5440 | Term Spring 2 2015 Student Access 3.9.2015 12:00 AM EDT 5.3.2015 11:59 PM EDT | Section 3

FM_finalexam_concepts - Financial Management BUS5440 | Term...

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Financial Management BUS5440 | Term: Spring 2 2015 Student Access: 3.9.2015 12:00 AM EDT - 5.3.2015 11:59 PM EDT | Section: 3 QUESTION:1[QUESTION BANK ID:269413]TYPE:MULTIPLE CHOICECORRECTWhich of the following statements is correct? << HIDE ANSWERS A When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are deductible by the paying corporation B All else equal, an increase in a company’s stock price will increase its marginal cost of retained earnings, r s C All else equal, an increase in a company’s stock price will increase its marginal cost of new common equity, r e D Since the money is readily available, the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt E If a company’s tax rate increases but the YTM on its noncallable bonds remains the same, the after-tax cost of its debt will fall QUESTION: 2 [QUESTION BANK ID: 269417] TYPE: MULTIPLE CHOICE CORRECT
Which of the following statements is correct? << HIDE ANSWERS AA change in a company’s target capital structure cannot affect its WACCBWACC calculations should be based on the before-tax costs of all the individual capital componentsCFlotation costs associated with issuing new common stock normally reduce the WACCDIf a company’s tax rate increases, then, all else equal, its weighted average cost of capital will declineEAn increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing QUESTION:3[QUESTION BANK ID:269419]TYPE:MULTIPLE CHOICECORRECTWhich of the following statements is correct? << HIDE ANSWERS

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