Financial Management - Study Mode

[#1121] A company who issues bonds or stocks in result raised funds which finally
Correct Answer

(C) increases cash

Explanation

Solution: A company who issues bonds or stocks in result raised funds which finally increases cash.

[#1122] During planning period, a marginal cost for raising a new debt is classified as
Correct Answer

(B) relevant cost

Explanation

Solution: During planning period, a marginal cost for raising a new debt is classified as relevant cost. Relevant cost is a managerial accounting term that describes avoidable costs that are incurred when making business decisions. The concept of relevant cost is used to eliminate unnecessary data that could complicate the decision-making process.

[#1123] Cost of common stock is 14% and bond risk premium is 9% then bond yield will be
Correct Answer

(B) 5.00%

Explanation

Solution: Bond yield = Cost of common stock - Bond risk premium = 14% - 9% = 5.00%

[#1124] In weighted average cost of capital, a company can affect its capital cost through
Correct Answer

(D) all of above

Explanation

Solution: In weighted average cost of capital, a company can affect its capital cost through policy of capital structure, policy of dividends and policy of investment

[#1125] A risk associated with project and way considered by well diversified stockholder is classified as
Correct Answer

(B) beta risk

Explanation

Solution: A risk associated with project and way considered by well diversified stockholder is classified as beta risk. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta risk is the probability that a false null hypothesis will be accepted by a statistical test.