MBA 702 EXAM 3 Questions LSUS MBA 702 Module
3 NEWEST 2026-2027 ACTUAL EXAM COMPLETE
125 QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) ALREADY
GRADED A+ BRAND NEW!!
A firm has a debt-equity ratio of .64, a cost of equity of 13.04 percent, and a cost of debt of 8
percent. The corporate tax rate is 35 percent. What would be the cost of equity if the firm were
all-equity financed? - CORRECT ANSWER: 11.56%
A firm has a market value equal to its book value, excess cash of $1,000, and equity worth
$17,800. The firm has 5,000 shares of stock outstanding and net income of $31,200. What will
the new earnings per share be if the firm uses its excess cash to complete a stock repurchase? -
CORRECT ANSWER: $6.61
A firm has an equity beta of 1.2, the risk-free rate of return is 3.4 percent, the market return is
15.7 percent, and the pretax cost of debt is 9.4 percent. The debt-equity ratio is .47. If you apply
the common beta assumptions, what is the firm's asset beta? - CORRECT ANSWER: .816
A payment made by the LSUS Corproation to its owners in the form of new shares of stock is
called a _____ dividend. - CORRECT ANSWER: stock
A portfolio consists of Stocks A and B and has an expected return of 11.6 percent. Stock A has an
expected return of 17.8 percent while Stock B is expected to return 8.4 percent. What is the
portfolio weight of Stock A? - CORRECT ANSWER: 34.04%
A stock had returns of 12 percent, 6 percent, 13 percent, -11 percent, and -2 percent over the past
five years. What is the geometric average return for this time period? - CORRECT ANSWER:
3.19%
, A stock with an actual return that lies above the security market line has: - CORRECT
ANSWER: yielded a higher return than expected for the level of risk assumed.
A year ago, Han purchased 500 shares of LSUS Corporation's stock at a price of $49.03 per
share. The stock pays an annual dividend of $.10 per share. Today, you sold all of your shares for
$58.14 per share. What is his total dollar return on this investment? - CORRECT ANSWER:
$4,605
According to the clientele effect, firms can only boost their stock price: - CORRECT ANSWER:
if an unsatisfied clientele group exists
According to the pecking-order theory, a firm's leverage ratio is determined by: - CORRECT
ANSWER: the firm's financing needs.
All else held constant, which one of these is most apt to increase the WACC of a leveraged firm?
- CORRECT ANSWER: a decrease in the tax rate
An unlevered firm has a cost of capital of 13.6 percent and earnings before interest and taxes of
$138,000. A levered firm with the same operations and assets has both a book value and a face
value of debt of $520,000 with an annual coupon of 7 percent. The applicable tax rate is 34
percent. What is the value of the levered firm? - CORRECT ANSWER: $846,505.88
As we add more diverse securities to a portfolio, the ____ risk of the portfolio will decrease
while the _____ risk will not. - CORRECT ANSWER: total; systematic
Assume a firm's debtholders are promised payments in one year of $35 if the firm does well and
$20 if the firm does poorly. There is a 50/50 chance of the firm doing well or poorly. If
bondholders are willing to pay $25.50, what is the promised return to those bondholders? -
CORRECT ANSWER: 7.84%
3 NEWEST 2026-2027 ACTUAL EXAM COMPLETE
125 QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) ALREADY
GRADED A+ BRAND NEW!!
A firm has a debt-equity ratio of .64, a cost of equity of 13.04 percent, and a cost of debt of 8
percent. The corporate tax rate is 35 percent. What would be the cost of equity if the firm were
all-equity financed? - CORRECT ANSWER: 11.56%
A firm has a market value equal to its book value, excess cash of $1,000, and equity worth
$17,800. The firm has 5,000 shares of stock outstanding and net income of $31,200. What will
the new earnings per share be if the firm uses its excess cash to complete a stock repurchase? -
CORRECT ANSWER: $6.61
A firm has an equity beta of 1.2, the risk-free rate of return is 3.4 percent, the market return is
15.7 percent, and the pretax cost of debt is 9.4 percent. The debt-equity ratio is .47. If you apply
the common beta assumptions, what is the firm's asset beta? - CORRECT ANSWER: .816
A payment made by the LSUS Corproation to its owners in the form of new shares of stock is
called a _____ dividend. - CORRECT ANSWER: stock
A portfolio consists of Stocks A and B and has an expected return of 11.6 percent. Stock A has an
expected return of 17.8 percent while Stock B is expected to return 8.4 percent. What is the
portfolio weight of Stock A? - CORRECT ANSWER: 34.04%
A stock had returns of 12 percent, 6 percent, 13 percent, -11 percent, and -2 percent over the past
five years. What is the geometric average return for this time period? - CORRECT ANSWER:
3.19%
, A stock with an actual return that lies above the security market line has: - CORRECT
ANSWER: yielded a higher return than expected for the level of risk assumed.
A year ago, Han purchased 500 shares of LSUS Corporation's stock at a price of $49.03 per
share. The stock pays an annual dividend of $.10 per share. Today, you sold all of your shares for
$58.14 per share. What is his total dollar return on this investment? - CORRECT ANSWER:
$4,605
According to the clientele effect, firms can only boost their stock price: - CORRECT ANSWER:
if an unsatisfied clientele group exists
According to the pecking-order theory, a firm's leverage ratio is determined by: - CORRECT
ANSWER: the firm's financing needs.
All else held constant, which one of these is most apt to increase the WACC of a leveraged firm?
- CORRECT ANSWER: a decrease in the tax rate
An unlevered firm has a cost of capital of 13.6 percent and earnings before interest and taxes of
$138,000. A levered firm with the same operations and assets has both a book value and a face
value of debt of $520,000 with an annual coupon of 7 percent. The applicable tax rate is 34
percent. What is the value of the levered firm? - CORRECT ANSWER: $846,505.88
As we add more diverse securities to a portfolio, the ____ risk of the portfolio will decrease
while the _____ risk will not. - CORRECT ANSWER: total; systematic
Assume a firm's debtholders are promised payments in one year of $35 if the firm does well and
$20 if the firm does poorly. There is a 50/50 chance of the firm doing well or poorly. If
bondholders are willing to pay $25.50, what is the promised return to those bondholders? -
CORRECT ANSWER: 7.84%
