MGT 6201 Finance –
General Exam
Questions Provided
with Verified Answers
Latest Updated 2026
, The minimum rate of return a corporation must earn on its invested capital
to break even in economic terms is called the _.
Cost of Capital
Why is the cost of debt multiplied by (1 - Tax Rate) when calculating WACC?
Interest paid on debt is tax-deductible.
What two primary components determine a firm's cost of debt capital?
The risk-free Treasury bond rate and a default risk premium.
How is a 'basis point' defined in terms of percentage?
One basis point equals 0.01% (or 100 basis points equal 1%).
In bond ratings, any rating below__is considered a junk bond or speculative grade.
Triple B (BBB/Baa)
Term: Cost of Equity Capital
Definition: The rate of return shareholders expect the firm to earn on its equity
capital.
General Exam
Questions Provided
with Verified Answers
Latest Updated 2026
, The minimum rate of return a corporation must earn on its invested capital
to break even in economic terms is called the _.
Cost of Capital
Why is the cost of debt multiplied by (1 - Tax Rate) when calculating WACC?
Interest paid on debt is tax-deductible.
What two primary components determine a firm's cost of debt capital?
The risk-free Treasury bond rate and a default risk premium.
How is a 'basis point' defined in terms of percentage?
One basis point equals 0.01% (or 100 basis points equal 1%).
In bond ratings, any rating below__is considered a junk bond or speculative grade.
Triple B (BBB/Baa)
Term: Cost of Equity Capital
Definition: The rate of return shareholders expect the firm to earn on its equity
capital.
