BCOR 2204 FINAL EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
Common Stock - Answers a security that represents ownership in a firm
Po - Answers Todays price
Debt - Answers all borrowing incurred by a firm
Equity - Answers funds provided by the firms owned that are repaid based on performance
Voice in management - Answers debt holders have no rights in the firm
stock holders a=are owners and have voting rights
Claims on Income and assets - Answers Stockholders claim on income are secondary to bondholders
Their claims on income cannot be paid until creditors have been satisfied which is why they get
greater returns since they have greater risk
Maturity - Answers Equity has no maturity while debt does
Tax treatment - Answers Interest payments are tax deductible while dividend payments are not
This means that debt financing cost less than equity financing
Zero growth model (preferred stock) - Answers CF/Rate
D0 - Answers Dividend just paid
D1 - Answers next dividend to be paid
D1= - Answers D0(1+g)
Dt= - Answers D0(1+g)^t
R - Answers required rate of return
g - Answers growth rate of dividend
r - Answers cost
w - Answers weight
ws x rs - Answers cost of common stock
wp x rp - Answers cost of preferred
cost of capital - Answers return a company needs to achieve in order to justify cost of capital project
Net present value (NPV) - Answers value of project
WACC (weighted average cost of capital) - Answers firms average cost of capital
wd - Answers proportion of long term debt
wp - Answers proportion of preferred stock
ws - Answers proportion of common stock
wd+wp+ws = - Answers 1
rd - Answers rate of return (YTM) firm must pay on new borrowing
Flotation cost - Answers total cost of issuing and selling a security
underwriting costs - Answers compensation earned by investment bankers for selling security
administrative costs - Answers issuer expenses such as legal, accounting, and printing
net proceeds - Answers funds actually received by the firm from the sale of a security
PMT and FV - Answers negative
ri - Answers interest payments are tax deductible which reduces a firms taxable income and tax
liability
after tax cost of debt
rp - Answers cost of preferred stock
dividend/net proceeds
rs - Answers cost of common stock
rate at which investors discount the expected dividends of the firm to determine share value
Capital asset pricing model (CAPM) - Answers relationship between the required return rs and the
nondiversifiable risk (b)
Rf - Answers risk free rate of return
rm - Answers market return
Constant growth model vs CAPM - Answers constant growth doesn't look at risk instead it used
market price as expected risk and not firms risk (b)
Common Stock - Answers a security that represents ownership in a firm
Po - Answers Todays price
Debt - Answers all borrowing incurred by a firm
Equity - Answers funds provided by the firms owned that are repaid based on performance
Voice in management - Answers debt holders have no rights in the firm
stock holders a=are owners and have voting rights
Claims on Income and assets - Answers Stockholders claim on income are secondary to bondholders
Their claims on income cannot be paid until creditors have been satisfied which is why they get
greater returns since they have greater risk
Maturity - Answers Equity has no maturity while debt does
Tax treatment - Answers Interest payments are tax deductible while dividend payments are not
This means that debt financing cost less than equity financing
Zero growth model (preferred stock) - Answers CF/Rate
D0 - Answers Dividend just paid
D1 - Answers next dividend to be paid
D1= - Answers D0(1+g)
Dt= - Answers D0(1+g)^t
R - Answers required rate of return
g - Answers growth rate of dividend
r - Answers cost
w - Answers weight
ws x rs - Answers cost of common stock
wp x rp - Answers cost of preferred
cost of capital - Answers return a company needs to achieve in order to justify cost of capital project
Net present value (NPV) - Answers value of project
WACC (weighted average cost of capital) - Answers firms average cost of capital
wd - Answers proportion of long term debt
wp - Answers proportion of preferred stock
ws - Answers proportion of common stock
wd+wp+ws = - Answers 1
rd - Answers rate of return (YTM) firm must pay on new borrowing
Flotation cost - Answers total cost of issuing and selling a security
underwriting costs - Answers compensation earned by investment bankers for selling security
administrative costs - Answers issuer expenses such as legal, accounting, and printing
net proceeds - Answers funds actually received by the firm from the sale of a security
PMT and FV - Answers negative
ri - Answers interest payments are tax deductible which reduces a firms taxable income and tax
liability
after tax cost of debt
rp - Answers cost of preferred stock
dividend/net proceeds
rs - Answers cost of common stock
rate at which investors discount the expected dividends of the firm to determine share value
Capital asset pricing model (CAPM) - Answers relationship between the required return rs and the
nondiversifiable risk (b)
Rf - Answers risk free rate of return
rm - Answers market return
Constant growth model vs CAPM - Answers constant growth doesn't look at risk instead it used
market price as expected risk and not firms risk (b)
