LSUS- FIN701 Final Exam Questions With Complete Solutions 2025/2026

LSUS- FIN701 Final Exam Questions With Complete Solutions 2025/2026 A company's current cost of capital is based on A) Only the return required by the company's current shareholders B) Current market rate of return on equity shares C) weight costs of all future funding sources D) both returns currently required by its debtholders and stockholders - answer-D) both returns currently required by its debtholders and stockholders All else constant, which one of the following will increase a company's cost of equity if the company computes that cost using the security market line approach? Assume the firm currently pays an annual dividend of $1 a share and has a beta of 1.2. A) reduction in the dividend amount B) an increase in the dividend amount C) A reduction in the market rate of return D) A reduction in the firm's beta E) A reduction in the risk free rate - answer-E) A reduction in the risk free rate Assume russo's has a dept equity ratio of .4 and uses the capital asset pricing model to determine its cost of equity. As a result, the company's cost of equity A) is affected by the firm's rate of growth projections B) implies that the firm pays out all of its earnings to its shareholders C) is dependent upon a reliable estimate of the market risk premium D) would be unaffected if the dividend discount model were applied instead E) will be unaffected by changes in overall market risks. - answer-C) is dependent upon a reliable estimate of the market risk premiumA group of individuals got together and purchased all of the outstanding shares of common stock DL smith inc. What is the return that these individuals require on this investment called A) dividend yield B) cost of equity C) capital gains yield - answer-B) cost of equity