BCOR 340 FINAL | QUESTIONS AND ANSWERS | WINTER 2026 | WITH COMPLETE
SOLUTION.
Western electric has 21,000 shares of common stock outstanding at a price per share of $61 and a rate
of return of 15.6%. The firm has 11,000 shares of $8 preferred stock outstanding at price of $48 a share.
the outstanding debt has a total face value of $275,00 and currently sells for 104 percent of face. the
yield to maturity on the debt is 8.81 percent. what is the firms weighted average cost of capital if the tax
rate is 35% - (ANSWER)Common stock: 21,000 × $61 = $1,281,000
Preferred stock: 11,000 × $48 = $528,000
Debt: 104% × $275,000 = $286,000
Total market value = $1,281,000 + 528,000 + 286,000 = $2,095,000
WACC = ($1,281,000/$2,095,000)(.156) + ($528,000/$2,095,000)($8/$48) +
($286,000/$2,095,000)(.0881)(1 -.35) = .1452, or 14.52 percent
Which of the following statements are correct?
A. the NPV is a measure of profits expressed in todays dollars
B. The NPV is positive when the required return exceeds the internal rate of return.
C. If the initial cost of a project is increased, the NPV of that project will also increase.
D. If the internal rate of return equals the required return, the NPV will equal zero.
E. NPV is equal to an investment's cash inflows discounted to today's dollars. - (ANSWER)D. if the
internal rate of return equals the required return, the NPV will equal zero
Which one of the following bonds is the most sensitive to changes in market interest
rates?
A. 5-year, zero coupon
B. 5-year, 5 percent coupon
C. 5-year, 8 percent coupon
D. 10-year, zero coupon
E. 10-year, 5 percent coupon - (ANSWER)D. The longer the maturity, lower the coupon, more sensitive
to changes in market interest rates.
Which statement is correct?
, BCOR 340 FINAL | QUESTIONS AND ANSWERS | WINTER 2026 | WITH COMPLETE
SOLUTION.
A. An underpriced security will plot below the security market line.
B. A security with a beta of 1.54 will plot on the security market line if it is correctly
priced.
C. A portfolio with a beta of .93 will plot to the right of the overall market.
D. A security with a beta of .99 will plot above the security market line if it is correctly
priced.
E. A risk-free security will plot at the origin - (ANSWER)B. A security with a beta of 1.54 will plot on the
security market lines it it is correctly priced
The present value of a lump sum future amount - (ANSWER)increases as the interest rate decreases.
Wes Motors has total assets of $98,300, net working capital of $11,300, owners' equity of $41,600, and
long-term debt of $38,600. What is the value of the current assets? - (ANSWER)Current liabilities =
$98,300 - 38,600 - 41,600 = $18,100
Current assets = $11,300 + 18,100 = $29,400
What would increase the current value of a stock? - (ANSWER)increase in the capital gains yield
You are comparing three investments, all of which pay $100 a month and have a interest rate of 8
percent. one is ordinary annuity, one is an annuity due, and the third investment is a perpetuity. which
one of the following statements is correct given these three investment options? - (ANSWER)The
present value of the perpetuity has to be higher than the present value of either the ordinary annuity or
the annuity due
a negative cash flow to stockholders indicates a firm - (ANSWER)received more from selling stock than it
paid out to shareholders
Jessica invested $2,000 today in an investment that pay 6.5 percent annual interest. Which one of the
following statements is correct, assuming all interest is reinvested. - (ANSWER)she could have the same
future value and invest less than 2,000 initially if she could earn more than 6.5 percent interest
SOLUTION.
Western electric has 21,000 shares of common stock outstanding at a price per share of $61 and a rate
of return of 15.6%. The firm has 11,000 shares of $8 preferred stock outstanding at price of $48 a share.
the outstanding debt has a total face value of $275,00 and currently sells for 104 percent of face. the
yield to maturity on the debt is 8.81 percent. what is the firms weighted average cost of capital if the tax
rate is 35% - (ANSWER)Common stock: 21,000 × $61 = $1,281,000
Preferred stock: 11,000 × $48 = $528,000
Debt: 104% × $275,000 = $286,000
Total market value = $1,281,000 + 528,000 + 286,000 = $2,095,000
WACC = ($1,281,000/$2,095,000)(.156) + ($528,000/$2,095,000)($8/$48) +
($286,000/$2,095,000)(.0881)(1 -.35) = .1452, or 14.52 percent
Which of the following statements are correct?
A. the NPV is a measure of profits expressed in todays dollars
B. The NPV is positive when the required return exceeds the internal rate of return.
C. If the initial cost of a project is increased, the NPV of that project will also increase.
D. If the internal rate of return equals the required return, the NPV will equal zero.
E. NPV is equal to an investment's cash inflows discounted to today's dollars. - (ANSWER)D. if the
internal rate of return equals the required return, the NPV will equal zero
Which one of the following bonds is the most sensitive to changes in market interest
rates?
A. 5-year, zero coupon
B. 5-year, 5 percent coupon
C. 5-year, 8 percent coupon
D. 10-year, zero coupon
E. 10-year, 5 percent coupon - (ANSWER)D. The longer the maturity, lower the coupon, more sensitive
to changes in market interest rates.
Which statement is correct?
, BCOR 340 FINAL | QUESTIONS AND ANSWERS | WINTER 2026 | WITH COMPLETE
SOLUTION.
A. An underpriced security will plot below the security market line.
B. A security with a beta of 1.54 will plot on the security market line if it is correctly
priced.
C. A portfolio with a beta of .93 will plot to the right of the overall market.
D. A security with a beta of .99 will plot above the security market line if it is correctly
priced.
E. A risk-free security will plot at the origin - (ANSWER)B. A security with a beta of 1.54 will plot on the
security market lines it it is correctly priced
The present value of a lump sum future amount - (ANSWER)increases as the interest rate decreases.
Wes Motors has total assets of $98,300, net working capital of $11,300, owners' equity of $41,600, and
long-term debt of $38,600. What is the value of the current assets? - (ANSWER)Current liabilities =
$98,300 - 38,600 - 41,600 = $18,100
Current assets = $11,300 + 18,100 = $29,400
What would increase the current value of a stock? - (ANSWER)increase in the capital gains yield
You are comparing three investments, all of which pay $100 a month and have a interest rate of 8
percent. one is ordinary annuity, one is an annuity due, and the third investment is a perpetuity. which
one of the following statements is correct given these three investment options? - (ANSWER)The
present value of the perpetuity has to be higher than the present value of either the ordinary annuity or
the annuity due
a negative cash flow to stockholders indicates a firm - (ANSWER)received more from selling stock than it
paid out to shareholders
Jessica invested $2,000 today in an investment that pay 6.5 percent annual interest. Which one of the
following statements is correct, assuming all interest is reinvested. - (ANSWER)she could have the same
future value and invest less than 2,000 initially if she could earn more than 6.5 percent interest
