BUS 2203 PRINCIPLES OF FINANCE MILESTONE 3 SOPHIA QUESTIONS WITH VERIFIED ANSWER,100%CORRECT

BUS 2203 PRINCIPLES OF FINANCE MILESTONE 3 SOPHIA QUESTIONS WITH VERIFIED ANSWER 1 One reason a company may choose to issue additional debt instead of equity when raising capital is that . ● the company will be less leveraged ● equity increases volatility ● debt interest payments are tax-deductible ● too much equity raises the risk of bankruptcy 2 Mason is a financial analyst who specializes in securities. When providing an analysis of securities to which he has a personal connection, he discloses his conflict of interest. By doing so, which federal regulation is he complying with? ● Securities Act Amendments of 1975 ● Securities Act of 1933 ● Sarbanes-Oxley Act of 2002 ● Securities Exchange Act of 1934 CONCEPT Market Regulation 3 Company A Company B Market Value of Equity $700,000 $900,000 Market Value of Debt $300,000 $200,000 Cost of Equity 8% 10% Cost of Debt 1.5% 3% Tax Rate 30% 25% Based solely on their current weighted average cost of capital, which company should pursue an investment opportunity with an expected return of 7%? ● Only Company B ● Both Company A and Company B ● Neither Company A nor Company B ● Only Company A CONCEPT The WACC 4 Using the following variables, calculate an organization's cost of debt on a $500,000 bond. Rf: 1% credit-risk rate: 5% t: 15% ● $25,500 ● $29,550 ● $30,000 ● $4,500 CONCEPT Valuing Different Costs 5 Select the true statement about the bankruptcy process. ● A company must still pay its debts on time while in bankruptcy. ● A Chapter 7 bankruptcy is the least common form of bankruptcy for businesses. ● A Chapter 11 bankruptcy can be quite complicated and can take a long time to complete. ● Companies that reorganize under Chapter 11 are guaranteed a lower cost of capital in the future.