WGU C214 FINC 6000 Financial Management OBJECTIVE ASSESSMENT GUIDE Q & S 2025/2026

1. Multiple Choice: Which of the following is not a
component of the Weighted Average Cost of Capital
(WACC)?
 a) Cost of debt
 b) Market risk premium
 c) Cost of equity
 d) Cost of preferred stock
 Answer: b) Market risk premium
 Rationale: The market risk premium is not a direct
component of WACC. WACC is calculated using the costs
of all capital components (debt, equity, and preferred stock),
and the market risk premium is part of the Capital Asset
Pricing Model (CAPM) used to determine the cost of equity.
2. Fill-in-the-Blank: The __________ is the rate of return
required by investors to compensate for the risk of owning a
security.
 Answer: Expected return
 Rationale: The expected return is the return that investors
anticipate or demand for taking on the risk of investing in a
security. It is a fundamental concept in financial
management and valuation.
3. True/False: The Modigliani-Miller theorem states that, in
the absence of taxes, bankruptcy costs, and asymmetric
information, the value of a firm is unaffected by its capital
structure.
 Answer: True
 Rationale: The Modigliani-Miller theorem posits that under
certain market conditions, the value of a firm is determined
by its operating income and investment decisions, and not