CORPORATE FINANCE - D362
WESTERN GOVERNORS UNIVERSITY
(WGU) PRE-ASSESSMENT
QUESTIONS WITH COMPLETE
ANSWERS!!
1 of 67
Term
Alliah Company and Freedom Rock Bicycles are engaged in a loan
covenant that provided Freedom Rock Bicycles with lending to
cover research and development costs. After three months,
Freedom Rock Bicycles breached the covenant by not submitting
the principal and interest payments when due to Alliah Company.
How will the covenant breach impact Freedom Rock Bicycles' capital
structure
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, The company's leverage It will help identify the sequence in
will increase which capital must be used to
save on costs.
By increasing the likelihood of
Borrow a short-term loan bankruptcy
Don't know?
2 of 67
Term
Synesthor is planning to issue preferred stock in the primary
market to raise capital to fund new executive team hires to
improve its
overseas operations and domestic marketing efforts. The company's
preferred stock will pay an $11 dividend per share in perpetuity.
Investors require a 15% return on Synesthor's preferred stock.
What is the issuance price for Synesthor's preferred stock, based on
a perpetuity model
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93.33 80.33
73.33 33.33
Don't know?
, 3 of 67
Term
A company issued $4,500 face-value vanilla bonds at par with a
5.00% coupon rate that pays interest semiannually. The bonds
mature in four years. The company had an AA credit rating at
issuance. Shortly after the bonds were issued, the company's credit
rating was upgraded to AAA, which decreased its cost of debt to
4.50%.
What is the price of the bonds under the company's new credit
rating
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$19,308 $4,582
11.73% 11.50%
Don't know?
, 4 of 67
Term
A company is considering a project with an initial cost of $75,000
and expected net cash flows of $45,000 in Year 1, $20,000 in Year 2,
and $35,000 in Year 3.
What is the expected payback period of this project
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2.29 years 1.50 years
4.00 years 3.00 years
Don't know?
5 of 67
Term
An investor recently purchased a zero-coupon bond. The bond has
a $6,000 face value and matures in four years. The investor paid
$3,431 for the bond. The interest compounds annually.
What is the interest rate for the bond
Give this one a try later!
WESTERN GOVERNORS UNIVERSITY
(WGU) PRE-ASSESSMENT
QUESTIONS WITH COMPLETE
ANSWERS!!
1 of 67
Term
Alliah Company and Freedom Rock Bicycles are engaged in a loan
covenant that provided Freedom Rock Bicycles with lending to
cover research and development costs. After three months,
Freedom Rock Bicycles breached the covenant by not submitting
the principal and interest payments when due to Alliah Company.
How will the covenant breach impact Freedom Rock Bicycles' capital
structure
Give this one a try later!
, The company's leverage It will help identify the sequence in
will increase which capital must be used to
save on costs.
By increasing the likelihood of
Borrow a short-term loan bankruptcy
Don't know?
2 of 67
Term
Synesthor is planning to issue preferred stock in the primary
market to raise capital to fund new executive team hires to
improve its
overseas operations and domestic marketing efforts. The company's
preferred stock will pay an $11 dividend per share in perpetuity.
Investors require a 15% return on Synesthor's preferred stock.
What is the issuance price for Synesthor's preferred stock, based on
a perpetuity model
Give this one a try later!
93.33 80.33
73.33 33.33
Don't know?
, 3 of 67
Term
A company issued $4,500 face-value vanilla bonds at par with a
5.00% coupon rate that pays interest semiannually. The bonds
mature in four years. The company had an AA credit rating at
issuance. Shortly after the bonds were issued, the company's credit
rating was upgraded to AAA, which decreased its cost of debt to
4.50%.
What is the price of the bonds under the company's new credit
rating
Give this one a try later!
$19,308 $4,582
11.73% 11.50%
Don't know?
, 4 of 67
Term
A company is considering a project with an initial cost of $75,000
and expected net cash flows of $45,000 in Year 1, $20,000 in Year 2,
and $35,000 in Year 3.
What is the expected payback period of this project
Give this one a try later!
2.29 years 1.50 years
4.00 years 3.00 years
Don't know?
5 of 67
Term
An investor recently purchased a zero-coupon bond. The bond has
a $6,000 face value and matures in four years. The investor paid
$3,431 for the bond. The interest compounds annually.
What is the interest rate for the bond
Give this one a try later!
