Healthcare Finance Final Exam (SPEA-
H 353) Question and answers already
passed 2025/2026
Capital Structure - correct answer ✔The mix of debt and equity financing used by a business
Optimal Capital Structure - correct answer ✔The mix of debt and equity financing that management
believes to be most appropriate for the business. Both quantitative and qualitative
What is most important to owners? - correct answer ✔The return expected on their equity investment.
Return on Equity - correct answer ✔measures the dollars of earnings per dollar of equity investment
Financial Leverage - correct answer ✔The use of fixed cost financing; typically debt financing
Goal of Cost of Capital estimation process. - correct answer ✔Estimate a business's corporate cost of
capital, which represents an average cost of a business's financing.
The corporate cost of capital sets the opportunity rate for new capital investments. - correct answer ✔
Opportunity Cost Rate - correct answer ✔The rate of return expected on alternative investments
similar in risk to the investment being evaluated
How does debt financing create a tax benefit? - correct answer ✔because the interest expense is tax
deductible
Historical/Embedded - correct answer ✔reflect the cost of funds raised in the past
, New/Marginal - correct answer ✔Reflect the cost of funds to be raised in the future.
What does the Corporate Cost of Capital represent? - correct answer ✔The cost of each new dollar of
capital raised rather than the average of all dollars raised in the past.
The required rates of return set by investors on the business's debt and equity are based on what two
factors? - correct answer ✔1. The inherent riskiness of the business (Business Risk)
2. The amount of debt financing used (Financial Risk)
What is the primary purpose of estimating a business's Corporate Cost of Capital? - correct answer ✔To
help make capital budgeting decisions
Hurdle Rate - correct answer ✔Minimum return necessary for a project to be financially attractive.
Aggregate Risk - correct answer ✔The riskiness of a firms average project.
(A higher risk project must have a higher project cost of capital than a low-risk project has)
Project Cost of Capital - correct answer ✔The discount rate (Hurdle rate/Opportunity rate) that reflects
the unique risk of a project.
Divisional Cost of Capital - correct answer ✔The discount rate (Hurdle rate/Opportunity rate) that
reflects the unique risk of a division within a corporation.
Managerial Accounting - correct answer ✔The field of accounting that focuses on all levels within an
organizations and is used internally for managerial decision making.
H 353) Question and answers already
passed 2025/2026
Capital Structure - correct answer ✔The mix of debt and equity financing used by a business
Optimal Capital Structure - correct answer ✔The mix of debt and equity financing that management
believes to be most appropriate for the business. Both quantitative and qualitative
What is most important to owners? - correct answer ✔The return expected on their equity investment.
Return on Equity - correct answer ✔measures the dollars of earnings per dollar of equity investment
Financial Leverage - correct answer ✔The use of fixed cost financing; typically debt financing
Goal of Cost of Capital estimation process. - correct answer ✔Estimate a business's corporate cost of
capital, which represents an average cost of a business's financing.
The corporate cost of capital sets the opportunity rate for new capital investments. - correct answer ✔
Opportunity Cost Rate - correct answer ✔The rate of return expected on alternative investments
similar in risk to the investment being evaluated
How does debt financing create a tax benefit? - correct answer ✔because the interest expense is tax
deductible
Historical/Embedded - correct answer ✔reflect the cost of funds raised in the past
, New/Marginal - correct answer ✔Reflect the cost of funds to be raised in the future.
What does the Corporate Cost of Capital represent? - correct answer ✔The cost of each new dollar of
capital raised rather than the average of all dollars raised in the past.
The required rates of return set by investors on the business's debt and equity are based on what two
factors? - correct answer ✔1. The inherent riskiness of the business (Business Risk)
2. The amount of debt financing used (Financial Risk)
What is the primary purpose of estimating a business's Corporate Cost of Capital? - correct answer ✔To
help make capital budgeting decisions
Hurdle Rate - correct answer ✔Minimum return necessary for a project to be financially attractive.
Aggregate Risk - correct answer ✔The riskiness of a firms average project.
(A higher risk project must have a higher project cost of capital than a low-risk project has)
Project Cost of Capital - correct answer ✔The discount rate (Hurdle rate/Opportunity rate) that reflects
the unique risk of a project.
Divisional Cost of Capital - correct answer ✔The discount rate (Hurdle rate/Opportunity rate) that
reflects the unique risk of a division within a corporation.
Managerial Accounting - correct answer ✔The field of accounting that focuses on all levels within an
organizations and is used internally for managerial decision making.
