FIN 6100 Exam 2 Questions & Answers Latest Update 100% Solved
FIN 6100 Exam 2 Questions & Answers Latest
Update 100% Solved
Correct
Incorrect
What is the cost of capital? - ✔-the overall interest rate that companies pay to finance operations and
the purchase of assets.
What happens if a company is earning more than their WACC rate?
Less than? - ✔-more: they are increasing the value of its equity
less: losing value for shareholders
WACC formula?
What do the different parts stand for? - ✔-WACC = WdKd(1-T) + WeKe
Wd: weight of debt
Kd: cost of debt (interest rate)
T: Tax shield (cost of debt after interest)
We: weight of equity
Ke: return on equity
What does the cost of debt mean? - ✔-the interest rate we would expect to pay on borrowed funds
FIN 6100 Exam 2 Questions & Answers Latest Update 100% Solved
, FIN 6100 Exam 2 Questions & Answers Latest Update 100% Solved
(Kd)
What is the best way to measure cost of debt? - ✔-Bonds
Terms to know
Maturity/term
Remaining term
Face Value
Coupon Payment - ✔-maturity/term: total life of the bond from origination to termination
remaining term: how much time until maturity
face value: amount of money returned when the bond matures
Coupon Payment: amount paid periodically to buyer.
coupon payment formula - ✔-payment = face value (FV) x coupon rate
Where are the terms of a bond set?
what does it include? (4) - ✔-in the Indenture contract
1. coupon rate and frequency
2. options attached
3. maturity
4. face value
FIN 6100 Exam 2 Questions & Answers Latest Update 100% Solved
FIN 6100 Exam 2 Questions & Answers Latest
Update 100% Solved
Correct
Incorrect
What is the cost of capital? - ✔-the overall interest rate that companies pay to finance operations and
the purchase of assets.
What happens if a company is earning more than their WACC rate?
Less than? - ✔-more: they are increasing the value of its equity
less: losing value for shareholders
WACC formula?
What do the different parts stand for? - ✔-WACC = WdKd(1-T) + WeKe
Wd: weight of debt
Kd: cost of debt (interest rate)
T: Tax shield (cost of debt after interest)
We: weight of equity
Ke: return on equity
What does the cost of debt mean? - ✔-the interest rate we would expect to pay on borrowed funds
FIN 6100 Exam 2 Questions & Answers Latest Update 100% Solved
, FIN 6100 Exam 2 Questions & Answers Latest Update 100% Solved
(Kd)
What is the best way to measure cost of debt? - ✔-Bonds
Terms to know
Maturity/term
Remaining term
Face Value
Coupon Payment - ✔-maturity/term: total life of the bond from origination to termination
remaining term: how much time until maturity
face value: amount of money returned when the bond matures
Coupon Payment: amount paid periodically to buyer.
coupon payment formula - ✔-payment = face value (FV) x coupon rate
Where are the terms of a bond set?
what does it include? (4) - ✔-in the Indenture contract
1. coupon rate and frequency
2. options attached
3. maturity
4. face value
FIN 6100 Exam 2 Questions & Answers Latest Update 100% Solved
