Repo 105

question 109

Multiple Choice

Repo 105:

• A) Is a toll that Enron used for off-the-book entities.
• B) Allowed debt instruments to be sold prior to public announcement of financial results.
• C) Was used by WorldCom to capitalize ordinary expenses.
• D) Was Chases' derivative trading strategy.

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Definitions:

Component Cost

The cost related to each source of capital, such as debt and equity, that a company uses for funding.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, usually with fixed dividends.

Cost of Retained Earnings

The opportunity cost for shareholders for having the company retain the earnings instead of distributing them, often considered in investment and dividend decisions.

Risk Free Rate

The theoretical rate of return of an investment with zero risk of financial loss, often represented by the yield on government bonds.