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Question
A venture has raised $4,000 of debt and $6,000 of equity to finance its firm. Its cost of borrowing is 6%, its tax rate is 40%, and its cost of equity capital is 8%. What is the venture's weighted average cost of capital?
a. 7.2%
b. 7.0%
c. 6.2%
d. 6.0%
Answer
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Related questions
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Which of the following is not a characteristic of Regulation A?
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According to the Investment Advisers Act of 1940, a bank would not be classified as an "investment adviser."
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The typical business organization for a venture in its rapid-growth stage is a partnership or LLC.
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The JOBS Act of 2012 created several important changes in Rule 506 of Regulation D and the expanded version of a Regulation A-like offering.a. Trueb. False
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In SEC v. Ralston Purina (1953), the U.S. Supreme Court took an important step toward defining a public offering for the purposes of Section 4(2) of the Securities Act of 1933.
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The Investment Company Act of 1940 defines investment companies and excludes them from using some of the registration exemptions originating in the 1933 Act.
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A venture's riskiness in terms of possible poor performance or failure would be considered to be very high in which of the following life cycle stages?
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A call option is the obligation to purchase a specific asset at a predetermined price.
a. True
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Registration rights embedded in a venture's securities grant certain classes of shareholders the right, under certain circumstances, to have their securities registered with the SEC.
a. True
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Q:
In which of the following credit programs does the SBA borrow money to be lent to Small Business Investment Companies (SBICs) and guarantee payment to investors?
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Q:
Which of the following types of crowdfunding involves soliciting funds from a large number of small investors in exchange for an equity position in the venture requesting the funding?
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b. equity crowdfunding
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d. asset incentive crowdfunding
Q:
Arranging for partial ownership as a component of the expected return to a lessor is known as:
a. venture leasing
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In which of the following credit programs does the SBA approve a loan and guarantee up to 85% of loan value?
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Commercial banks, credit unions, and/or financial services firms are lenders in which of the following SBA credit programs?
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b. CDC/504 loan
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Personal credit cards have proven to be a source of financing for startup firms for all of the following reasons except:
a. credit card debt is not based on the firm's ability to repay, but rather the individual cardholder's ability to repay
b. teaser rates afford initial low cost borrowing
c. balance transfers occur at below-prime rates
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The Small Business Administration was created by an act of Congress in 2003.a. Trueb. False
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Indirect public offerings have recently become a serious challenge to traditional venture capital firms.
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The returns to venture bank lenders are generated solely from interest payments made by borrowers plus the return of the loan principal.
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b. public pension funds
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The beginning of professional venture capitalists is considered to have begun with the establishment or formation of:
a. the Small Business Administration
b. Small Business Investment Companies
c. the American Research and Development organization
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b. the lead investor
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Q:
When screening possible investments, a venture capital firm might issue a SLOR, which stands for:
a. "standard letter of rejection"
b. "standing letter of reconciliation"
c. "standard letter of reassessment"
d. "senior letter of reference"