1|Page
SDSU BA 323 FINANCE FINAL EXAM NEWEST 2025/2026 ACTUAL
EXAM WITH COMPLETE QUESTIONS AND CORRECT DETAILED
ANSWERS (100% VERIFIED ANSWERS) |ALREADY GRADED A+|
||PROFESSOR VERIFIED||
What are flotation costs and why do they make retained earnings
cheaper than issuing new common stock? - ANSWER-
Transaction costs associated with issuing new securities. Issuing
new common stocks may send a negative signal to the capital
markets, which may depress the stock price.
How do changes in stock or debt change capital structure? -
ANSWER-Stock is expensive and debt is cheap. Since stock is
more risky than debt, it cost more to issue stock than debt.
If you increase the percentage of stock, __________. If you
decrease the percentage of debt, ___________. - ANSWER-
WACC goes up
If you decrease the percentage of stock, _____________. If you
increase the percentage of debt, ___________. - ANSWER-
WACC goes down.
,2|Page
Which method used to calculate WACC would yield the highest
value? - ANSWER-Market value since it has the highest equity.
Which method used to calculate WACC would yield the lowest
value?? - ANSWER-Book value
What is capital budgeting? - ANSWER-Analysis of potential
additions to fixed assets.
Long-term decisions; involve large expenditures.
Very important to firm's future.
What is capital? - ANSWER-Long-term assets used in production.
What is a company's strategic business plan? - ANSWER-A long-
run plan that outlines in broad terms the firm's basic strategy for
the next 5-10 years.
What are the 5 criteria used to accept or reject a project? -
ANSWER-1. Net present value (NPV)
, 3|Page
2. Internal rate of return (IRR)
3. Modified internal rate of return (MIRR)
4. Regular payback
5. Discounted payback
What is the difference between independent and mutually
exclusive projects? Which type of project is harder to calculate? -
ANSWER-With independent projects, the cash flows of one
project are unaffected by the acceptance of the other. In mutually
exclusive projects, the cash flows of one can be adversely
impacted by the acceptance of other projects (harder to calculate)
Explain the difference between normal and nonnormal cash flow
streams. - ANSWER-Normal cash flow streams initially have a
negative cash flow followed by a series of positive cash inflows.
Non-normal cash flow streams are irregular.
Which cash flow is most common and why. - ANSWER-Normal
cash flow is more common.
SDSU BA 323 FINANCE FINAL EXAM NEWEST 2025/2026 ACTUAL
EXAM WITH COMPLETE QUESTIONS AND CORRECT DETAILED
ANSWERS (100% VERIFIED ANSWERS) |ALREADY GRADED A+|
||PROFESSOR VERIFIED||
What are flotation costs and why do they make retained earnings
cheaper than issuing new common stock? - ANSWER-
Transaction costs associated with issuing new securities. Issuing
new common stocks may send a negative signal to the capital
markets, which may depress the stock price.
How do changes in stock or debt change capital structure? -
ANSWER-Stock is expensive and debt is cheap. Since stock is
more risky than debt, it cost more to issue stock than debt.
If you increase the percentage of stock, __________. If you
decrease the percentage of debt, ___________. - ANSWER-
WACC goes up
If you decrease the percentage of stock, _____________. If you
increase the percentage of debt, ___________. - ANSWER-
WACC goes down.
,2|Page
Which method used to calculate WACC would yield the highest
value? - ANSWER-Market value since it has the highest equity.
Which method used to calculate WACC would yield the lowest
value?? - ANSWER-Book value
What is capital budgeting? - ANSWER-Analysis of potential
additions to fixed assets.
Long-term decisions; involve large expenditures.
Very important to firm's future.
What is capital? - ANSWER-Long-term assets used in production.
What is a company's strategic business plan? - ANSWER-A long-
run plan that outlines in broad terms the firm's basic strategy for
the next 5-10 years.
What are the 5 criteria used to accept or reject a project? -
ANSWER-1. Net present value (NPV)
, 3|Page
2. Internal rate of return (IRR)
3. Modified internal rate of return (MIRR)
4. Regular payback
5. Discounted payback
What is the difference between independent and mutually
exclusive projects? Which type of project is harder to calculate? -
ANSWER-With independent projects, the cash flows of one
project are unaffected by the acceptance of the other. In mutually
exclusive projects, the cash flows of one can be adversely
impacted by the acceptance of other projects (harder to calculate)
Explain the difference between normal and nonnormal cash flow
streams. - ANSWER-Normal cash flow streams initially have a
negative cash flow followed by a series of positive cash inflows.
Non-normal cash flow streams are irregular.
Which cash flow is most common and why. - ANSWER-Normal
cash flow is more common.
