FIN 341 Final Exam UPDATED ACTUAL Questions And Correct Answers
Terms in this set (58)
after taxes cash flows Stockholders focus on:
marginal cost of debt capital Which part of WACC needs to be tax adjusted?
raising new capital The cost of capital is used primarily to make decisions that involve:
1) bank What are the two ways to raise debt capital?
2) issue bonds
cost is stated If you use a bank to raise capital:
The yield to maturity on outstanding long-term debt ? is often used as a measure of rd
aren't Preferred dividends ? tax-deductible
1) can't pay common dividend Firms try to pay preferred dividends otherwise:
2) difficult to raise additional funds
3) preferred stockholders may gain control of firm
lower Preferred stock will often have a ? before tax yield than the before tax yield on
debt
70% of preferred dividends are excluded from corporate Corporations own most preferred stock, because:
taxation
higher The after tax yield to an investor and the after tax cost to the issuer, are ? on
preferred stock than on debt
1) reinvested Earnings can be:
2) paid out as dividends
an opportunity cost If earnings are retained, there is:
opportunity cost the return that stockholders could earn on alternative investments of equal risk
1) CAPM 3 ways to determine the cost of common equity
2) DCF
3) Bond yield and risk premium
rm is highly uncertain What is the weakness of CAPM?
Growth rate is uncertain What is the weakness of DCF?
capital budgeting process to plan and purchase capital assets and fixed assets
Terms in this set (58)
after taxes cash flows Stockholders focus on:
marginal cost of debt capital Which part of WACC needs to be tax adjusted?
raising new capital The cost of capital is used primarily to make decisions that involve:
1) bank What are the two ways to raise debt capital?
2) issue bonds
cost is stated If you use a bank to raise capital:
The yield to maturity on outstanding long-term debt ? is often used as a measure of rd
aren't Preferred dividends ? tax-deductible
1) can't pay common dividend Firms try to pay preferred dividends otherwise:
2) difficult to raise additional funds
3) preferred stockholders may gain control of firm
lower Preferred stock will often have a ? before tax yield than the before tax yield on
debt
70% of preferred dividends are excluded from corporate Corporations own most preferred stock, because:
taxation
higher The after tax yield to an investor and the after tax cost to the issuer, are ? on
preferred stock than on debt
1) reinvested Earnings can be:
2) paid out as dividends
an opportunity cost If earnings are retained, there is:
opportunity cost the return that stockholders could earn on alternative investments of equal risk
1) CAPM 3 ways to determine the cost of common equity
2) DCF
3) Bond yield and risk premium
rm is highly uncertain What is the weakness of CAPM?
Growth rate is uncertain What is the weakness of DCF?
capital budgeting process to plan and purchase capital assets and fixed assets
