25-72 the Principal Objective in the Creation of _____ Is

question 16

Multiple Choice

25-72 The principal objective in the creation of _____ is to maximize asset values by separating good loans from bad loans

• A)hedge funds
• B)bad banks
• C)vulture funds
• D)structured banks
• E)correspondent banks

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Definitions:

WACC

The weighted average cost of capital, a measure of a firm's cost of capital in which each category of capital is proportionately weighted.

Firm Value

The total value of a company, measured by its market capitalization plus debts, minority interest, and preferred shares, minus total cash and cash equivalents.

Cost of Equity

The return a company theoretically pays to its equity investors to compensate them for the risk they undertake by investing in the stock.

WACC

Weighted Average Cost of Capital. It represents the average rate that a company is expected to pay to finance its assets, weighted according to the proportion of equity and debt in its capital structure.