BUS 370 Final Exam Questions and Answers
(100%Correct) | Latest Update 2026/2027 |
Graded A+.
The cost of equity is equal to the:
rate of return required by stockholders
Morgan Insurance Ltd. issued a fixed-rate perpetual preferred stock
three years ago and placed it privately with institutional investors.
The stock was issued at $25.00 per share with a $1.75 dividend. If
the company were to issue preferred stock today, the yield would
be 6.5 percent. The stock's current value is:
26.92
Suppose the cost of capital of the Gadget Company is 10 percent. If
Gadget has a capital structure that is 50 percent debt and 50
percent equity, its before-tax cost of debt is 5 percent, and its
, marginal tax rate is 20 percent, then its cost of equity capital is
closest to:
14%
Systematic risk is the only risk that investors require compensation
for bearing.
True
Long-term debt typically describes debt that will mature in two
years or more.
True
The historic cost of long-term debt is the appropriate cost of debt
for WACC calculations.
False
(100%Correct) | Latest Update 2026/2027 |
Graded A+.
The cost of equity is equal to the:
rate of return required by stockholders
Morgan Insurance Ltd. issued a fixed-rate perpetual preferred stock
three years ago and placed it privately with institutional investors.
The stock was issued at $25.00 per share with a $1.75 dividend. If
the company were to issue preferred stock today, the yield would
be 6.5 percent. The stock's current value is:
26.92
Suppose the cost of capital of the Gadget Company is 10 percent. If
Gadget has a capital structure that is 50 percent debt and 50
percent equity, its before-tax cost of debt is 5 percent, and its
, marginal tax rate is 20 percent, then its cost of equity capital is
closest to:
14%
Systematic risk is the only risk that investors require compensation
for bearing.
True
Long-term debt typically describes debt that will mature in two
years or more.
True
The historic cost of long-term debt is the appropriate cost of debt
for WACC calculations.
False
