The Characteristic Equation Of $A = \left( \begin{array} { c c } - 3 & - 5 \\1 & - 1\end{array} \right)$

question 32

Multiple Choice

The characteristic equation of $A = \left( \begin{array} { c c } - 3 & - 5 \\1 & - 1\end{array} \right)$ is

• A) \(\lambda ^ { 2 } + 4 \lambda - 2 = 0\)
• B) \(\lambda ^ { 2 } - 4 \lambda - 2 = 0\)
• C) \(\lambda ^ { 2 } - 4 \lambda - 8 = 0\)
• D) \(\lambda ^ { 2 } + 4 \lambda + 8 = 0\)
• E) \(\lambda ^ { 2 } + 4 \lambda + 2 = 0\)

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Definitions:

Cost of New Equity

The cost of obtaining additional funding through the issuance of new equity, considering underwriting fees and other issuance costs.

Retained Earnings

The portion of net income that is retained by the corporation rather than distributed to its owners as dividends.

Target Capital Structure

The relative amount of debt, preferred stock, and common equity that the firm desires. The weighted average cost of capital should be based on these target weights.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, a crucial part of capital budgeting and often calculated using models like CAPM.