BA-323 LEE FINAL EXAM
WACC - ANSWERS-combines weighted cost of all sources
Qhat is cost of capital affected by? - ANSWERS-duration of the
projects being evaluated
What does systematic risk affect> - ANSWERS-cost of equity
M&M Prop 1 - ANSWERS-value of a firm is independent of its
capital structure
M&M Prop 2 - ANSWERS-cost of equity capital is a linear function
of its capital structure
interest tax shield - ANSWERS-reduces taxes providing an implied
benefit to debt financing
capital structure - ANSWERS-% of debt and equity used to fund the
firm's assets
leverage - ANSWERS-use of debt in capital structure
tax shield - ANSWERS-debt interest payment (aka interest expense) x
tax rate
, objective of a firm - ANSWERS-to operate at the debt level that
optimized the value of a firm
prepacks - ANSWERS-prepackaged filings, corporation secures necc.
approval from majority of creditors first then files
cram-downs - ANSWERS-court-ordered plan acceptance, creditors
must accept even if they did not vote for it
section 363 - ANSWERS-auction-like bankruptcy, company goes to
highest bidder
workouts - ANSWERS-negotiated extensions or payments
excess cash - ANSWERS-can be used to issue a divided or preserve
the capital to buy back stock or invest in future projects
stock splits - ANSWERS-increases the number of shares outstanding,
decrease in the price per share
regular cash dividends - ANSWERS-made directly to stockholder,
usually each quarter
extra cash dividends - ANSWERS-"extra" amount, may not be
repeated in the future
WACC - ANSWERS-combines weighted cost of all sources
Qhat is cost of capital affected by? - ANSWERS-duration of the
projects being evaluated
What does systematic risk affect> - ANSWERS-cost of equity
M&M Prop 1 - ANSWERS-value of a firm is independent of its
capital structure
M&M Prop 2 - ANSWERS-cost of equity capital is a linear function
of its capital structure
interest tax shield - ANSWERS-reduces taxes providing an implied
benefit to debt financing
capital structure - ANSWERS-% of debt and equity used to fund the
firm's assets
leverage - ANSWERS-use of debt in capital structure
tax shield - ANSWERS-debt interest payment (aka interest expense) x
tax rate
, objective of a firm - ANSWERS-to operate at the debt level that
optimized the value of a firm
prepacks - ANSWERS-prepackaged filings, corporation secures necc.
approval from majority of creditors first then files
cram-downs - ANSWERS-court-ordered plan acceptance, creditors
must accept even if they did not vote for it
section 363 - ANSWERS-auction-like bankruptcy, company goes to
highest bidder
workouts - ANSWERS-negotiated extensions or payments
excess cash - ANSWERS-can be used to issue a divided or preserve
the capital to buy back stock or invest in future projects
stock splits - ANSWERS-increases the number of shares outstanding,
decrease in the price per share
regular cash dividends - ANSWERS-made directly to stockholder,
usually each quarter
extra cash dividends - ANSWERS-"extra" amount, may not be
repeated in the future
