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FIN6100 MODULE 2 EXAM QUESTIONS WITH 100% CORRECT ANSWERS | LATEST VERSION 2025/2026.

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Cost of Capital Definition - ANS The cost of capital (WACC) is the overall interest rate that companies pay to finance operations and assets, used in project valuation and investment decisions. What Determines WACC? - ANS WACC reflects the risk of the project, not just the funding source. Different divisions and projects within a company may have different WACCs. WACC Formula - ANS WACC = Wd Kd (1-T) + We Ke, where Wd and We are the weights of debt and equity, and Kd and Ke are their respective costs. Cost of Debt Definition - ANS The cost of debt (Kd) is the expected interest rate paid on borrowed funds, based on project risk and repayment terms. Sources of Debt Financing - ANS Debt financing can come from banks, selling bonds, or loans from individuals or other companies. Bond Terminology - ANS Maturity - Total life of bond; Face Value - Amount paid at maturity; Coupon Payment - Periodic interest paid to bondholder. Bond Indenture - ANS A legal contract specifying bond terms, including payment schedules, maturity, and any opt

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FIN6100 MODULE 2 EXAM QUESTIONS
WITH 100% CORRECT ANSWERS |
LATEST VERSION 2025/2026.




Cost of Capital Definition - ANS The cost of capital (WACC) is the overall interest rate that
companies pay to finance operations and assets, used in project valuation and investment
decisions.


What Determines WACC? - ANS WACC reflects the risk of the project, not just the funding
source. Different divisions and projects within a company may have different WACCs.


WACC Formula - ANS WACC = Wd Kd (1-T) + We Ke, where Wd and We are the weights of
debt and equity, and Kd and Ke are their respective costs.


Cost of Debt Definition - ANS The cost of debt (Kd) is the expected interest rate paid on
borrowed funds, based on project risk and repayment terms.


Sources of Debt Financing - ANS Debt financing can come from banks, selling bonds, or loans
from individuals or other companies.


Bond Terminology - ANS Maturity - Total life of bond; Face Value - Amount paid at maturity;
Coupon Payment - Periodic interest paid to bondholder.


Bond Indenture - ANS A legal contract specifying bond terms, including payment schedules,
maturity, and any options such as convertibility or callable features.

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