Financial Management - Study Mode
[#886] An interest rate which is paid by firm as soon as it issues debt is classified as pre-tax
Correct Answer
(D) cost of debt
Explanation
Solution: An interest rate which is paid by firm as soon as it issues debt is classified as pre-tax cost of debt. In most cases, this phrase refers to after-tax cost of debt, but it also means the company's cost of debt before taking taxes into account.
[#887] Beta which is estimated as regression slope coefficient is classified as
Correct Answer
(A) historical beta
Explanation
Solution: Beta which is estimated as regression slope coefficient is classified as historical beta. A beta coefficient is a measure of the volatility, or systematic risk, of an individual stock in comparison to the unsystematic risk of the entire market. In statistical terms, beta represents the slope of the line through a regression of data points from an individual stock's returns against those of the market.
[#888] In weighted average cost of capital, capital components are funds that usually offer by
Correct Answer
(B) investors
Explanation
Solution: In weighted average cost of capital, capital components are funds that usually offer by investors. The weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.
[#889] Cost which is used to calculate weighted average cost of capital is classified as
Correct Answer
(B) component cost of preferred stock
Explanation
Solution: Cost which is used to calculate weighted average cost of capital is classified as component cost of preferred stock. Cost of preferred stock is the rate of return required by holders of a company's preferred stock.
[#890] Special situation in which large projects are financed by with and securities claims on project's cash flow is classified as
Correct Answer
(B) project financing
Explanation
Solution: Special situation in which large projects are financed by with and securities claims on project's cash flow is classified as project financing. Project financing is a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights, and interests held as secondary collateral. Project finance is especially attractive to the private sector because companies can fund major projects off-balance sheet.