Bcor 2204 Quiz 3 Questions Answered Correctly Latest Update 2026

BCOR 2204 QUIZ 3 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026 Debt - Answers includes all borrowing incurred by a firm, including bonds, and is repaid according to a fixed schedule of payments. Equity - Answers consists of funds provided by the firm's owners (investors or stockholders) that are repaid subject to the firm's performance. Which has a voice in management debt or equity? - Answers Equity Which type of capital has an interest deduction - Answers Debt Does debt or equity have a maturity? - Answers Debt has a stated maturity Which is senior in claims on assets& income? - Answers Debt Who gets claims first stockholders or bondholders? - Answers Bondholders (creditors) Which is riskier stocks or bonds? - Answers Stocks equity's maturity date - Answers There is none, it's a permanent form of financing. Interest payments to debt-holders are treated as... - Answers tax deductible expenses Are dividend payments tax deductible? - Answers No 3 types of stock ownership - Answers Private Closely owned (small group) Publicly owned Authorized shares - Answers shares of common stock that a firm's corporate charter allows it to issue Outstanding shares - Answers issued shares of common stock held by investors, this includes private and public investors. Treasury stock - Answers issued shares of common stock held by the firm; often these shares have been repurchased by the firm. Issued shares - Answers shares of common stock that have been put into circulation. issued shares equation - Answers Issued shares = outstanding shares + treasury stock initial financing for most firms.. - Answers typically comes from a firm's original founders in the form of a common stock investment. 3 ways to 'go public' for a firm - Answers Public offering, rights offering, private placement Public offering - Answers When a firm offers its shares for sale to the general public. Rights offering - Answers When a firm sells new shares to existing shareholders Private placement - Answers the firm sells new securities directly to an investor or a group of investors. Find price of a stock by: - Answers discounting all future cashflows at an appropriate rate of return. What are the future cash flows? - Answers Dividends Appropriate rate of return - Answers Risk of those dividends Covenants - Answers Conditions lenders place on firms that seek long-term debt financing. Written into a bond. Tax treatment - Answers interest paid to bond holders vs. dividends to stock holders Tax credit - Answers An amount subtracted directly from the tax owed Tax deductible - Answers able to be deducted from taxable income when calculating income tax due. Lowers your tax burden. What happens when a company buys its own shares - Answers Drives up price/demand for shares. 3 reasons people buy/sell stocks - Answers Income (dividends) Diversify (portfolio) Pure speculation (thinking it will be worth more) The more risky the dividends - Answers The higher the rate of return 3 models for dividend growth rate - Answers 0 growth constant growth variable growth zero growth model - Answers the dividends are going to be the same every year forever. Basically a perpetuity. Constant growth model - Answers Dividends increase every year by a certain percent. Variable growth/ two stage growth model - Answers dividends grow in the beginning but taper off over time. allows the price of stocks to change and grow - Answers Constant growth model Po - Answers value of common stock Dt - Answers per-share dividend expected at the end of year t Rs - Answers required return on common stock Gordon model - Answers Common name for constant growth model What should financial managers consider when making decisions ? - Answers Expected dividends, Expected dividend growth, Risk What does WACC stand for? - Answers weighted average cost of capital WACC - Answers the rate of return expected by all stakeholders. Cost of capital - Answers represents the firm's cost of financing, and is the minimum rate of return that a project must earn to increase firm value. In order to invest in a project it - Answers must exceed the cost of capital Sources of long term capital - Answers -long term debt -stockholders' equity -preferred stock -common stock equity -common stock -retained earnings The before-tax cost of debt, rd - Answers is simply the rate of return the firm must pay on new borrowing pretax cost of debt - Answers the financing cost associated with new funds through long-term borrowing Net proceeds - Answers the funds actually received by the firm from the sale of a security Flotation costs - Answers the total costs of issuing and selling a security. The two components of flotation costs - Answers Underwriting costs Administrative costs Underwriting costs - Answers compensation earned by investment bankers for selling the security Administrative costs - Answers issuer expenses such as legal, accounting, and printing interest payments paid to bondholders are tax deductible so... - Answers the interest expense on debt reduces the firm's taxable income and, therefore, the firm's tax liability When you raise money through bond and common stock cheapest form is - Answers Bonds (debt) If you have to calculate YTM use price of bond or net proceeds? - Answers proceeds Difference between price of bond and net proceeds - Answers floatation costs The cost of retained earnings is the same as - Answers existing stock The IRR should be higher or lower than WACC - Answers Higher After tax salvage value - Answers salvage - T(salvage - book value) The value of any security or asset can be determined by finding - Answers The net present value of all future cashflows discounted at an appropriate rate of return wi - Answers proportion of long-term debt in capital structure wp - Answers proportion of preferred stock in capital structure ws - Answers proportion of common stock equity in capital structure cost of preferred stock, rp, - Answers the ratio of the preferred stock dividend to the firm's net proceeds from the sale of preferred stock. Dp/Np cost of common stock equity, rs - Answers the rate at which investors discount the expected dividends of the firm to determine its share value. D1 - Answers per-share dividend expectedat the end of year 1 g - Answers constant rate of growth in dividends capital asset pricing model (CAPM) - Answers describes the relationship between the required return, rs, and the nondiversifiable risk of the firm as measured by the beta coefficient, b. Which of the following is an advantage for a firm to issue common stock over long-term debt? - Answers no maturity date on which the par value of the issue must be repaid