5/12/25, 2:18 PM SDSU BA323 BRINCKS FINAL EXAM 2025 | ALL QUESTIONS AND CORRECT ANSWERS | GRADED A+ | NEWEST VERSION |…
SDSU BA323 BRINCKS FINAL EXAM 2025 | ALL
QUESTIONS AND CORRECT ANSWERS | GRADED
A+ | NEWEST VERSION | VERIFIED ANSWERS
WACC is necessary for making corporate investment
decisions, such as building a new factory. WACC
gauges the risk of a project (Higher WACC means
more risk associated.) Two sides of an investment
Why do we care about the
decision:
weighted average cost of
capital (WACC)?
- How much money will this project make?
- How much does it cost for the firm to get the funds
for this investment?
What are the 3 main Debt, preferred stock, and common equity are 3 main
sources of capital for the sources of capital
firm?
What are the 2 Retained earnings and new common stock are 2
components of common components of common equity.
equity?
What are 2 components of Short term notes payable and long-term debt are 2
debt? components of debt.
Do we care about after- After-tax capital cost since interest is tax deductible
tax or pre-tax analysis?
Why?
… 1/10
, 5/12/25, 2:18 PM SDSU BA323 BRINCKS FINAL EXAM 2025 | ALL QUESTIONS AND CORRECT ANSWERS | GRADED A+ | NEWEST VERSION |…
What are the 3 methods of Accounting numbers (book value), Market value and
determining a company's optimal capital structure determination are all
target weights? methods used to determine target weights.
What are the 3 ways to CAPM, DCF, and Bond-yield + risk premium
determine the cost of
common equity?
If earnings are retained, there is an opportunity cost
Why is there a cost for
(the return that stockholders could earn on alternative
retained earnings?
investments of equal risk).
Market conditions.
What factors influence a
The firm's capital structure and dividend policy.
company's composite
WACC?
The firm's investment policy. Firms with riskier projects
generally have a higher WACC.
Should companies use the No, because projects typically have different riskiness.
composite WACC as the
hurdle rate for each
project? Why not?
What are flotation costs Transaction costs associated with issuing new
and why do they make securities. Issuing new common stocks may send a
retained earnings cheaper negative signal to the capital markets, which may
than issuing new common depress the stock price.
stock?
How do changes in stock Stock is expensive and debt is cheap. Since stock is
or debt change capital more risky than debt, it cost more to issue stock than
structure? debt.
… 2/10
SDSU BA323 BRINCKS FINAL EXAM 2025 | ALL
QUESTIONS AND CORRECT ANSWERS | GRADED
A+ | NEWEST VERSION | VERIFIED ANSWERS
WACC is necessary for making corporate investment
decisions, such as building a new factory. WACC
gauges the risk of a project (Higher WACC means
more risk associated.) Two sides of an investment
Why do we care about the
decision:
weighted average cost of
capital (WACC)?
- How much money will this project make?
- How much does it cost for the firm to get the funds
for this investment?
What are the 3 main Debt, preferred stock, and common equity are 3 main
sources of capital for the sources of capital
firm?
What are the 2 Retained earnings and new common stock are 2
components of common components of common equity.
equity?
What are 2 components of Short term notes payable and long-term debt are 2
debt? components of debt.
Do we care about after- After-tax capital cost since interest is tax deductible
tax or pre-tax analysis?
Why?
… 1/10
, 5/12/25, 2:18 PM SDSU BA323 BRINCKS FINAL EXAM 2025 | ALL QUESTIONS AND CORRECT ANSWERS | GRADED A+ | NEWEST VERSION |…
What are the 3 methods of Accounting numbers (book value), Market value and
determining a company's optimal capital structure determination are all
target weights? methods used to determine target weights.
What are the 3 ways to CAPM, DCF, and Bond-yield + risk premium
determine the cost of
common equity?
If earnings are retained, there is an opportunity cost
Why is there a cost for
(the return that stockholders could earn on alternative
retained earnings?
investments of equal risk).
Market conditions.
What factors influence a
The firm's capital structure and dividend policy.
company's composite
WACC?
The firm's investment policy. Firms with riskier projects
generally have a higher WACC.
Should companies use the No, because projects typically have different riskiness.
composite WACC as the
hurdle rate for each
project? Why not?
What are flotation costs Transaction costs associated with issuing new
and why do they make securities. Issuing new common stocks may send a
retained earnings cheaper negative signal to the capital markets, which may
than issuing new common depress the stock price.
stock?
How do changes in stock Stock is expensive and debt is cheap. Since stock is
or debt change capital more risky than debt, it cost more to issue stock than
structure? debt.
… 2/10
