Podcast
Questions and Answers
According to trade-off theory, beyond the level of _________, the marginal benefit of tax
shield is outweighed by the marginal increase in the cost of equity.
According to trade-off theory, beyond the level of _________, the marginal benefit of tax shield is outweighed by the marginal increase in the cost of equity.
- Optimal level of debt (correct)
- Optimal level of equity
- Optimal WACC
- Optimal Tax Rate
Which of the following is an accurate measure of gearing ratio?
Which of the following is an accurate measure of gearing ratio?
- Debt/Capital (correct)
- Equity/Capital
- Debt/Stock Price
- Debt/Net Profit
According to Modigliani and Miller’s Proposition II (with tax), the optimal capital structure
is:
According to Modigliani and Miller’s Proposition II (with tax), the optimal capital structure is:
- 100% equity
- 100% debt (correct)
- 50% debt 50% equity
- 25% debt 75% equity
The cost of having to sell assets at below market value is an example of:
The cost of having to sell assets at below market value is an example of:
The fundamental principle behind tax exhaustion is:
The fundamental principle behind tax exhaustion is:
A high gearing ratio implies that a company has:
A high gearing ratio implies that a company has:
According to Pecking Order Theory, the order of preference of capital would be:
According to Pecking Order Theory, the order of preference of capital would be:
The explicit costs, such as the legal expenses, associated with corporate default are
classified as _____ costs. midterm
The explicit costs, such as the legal expenses, associated with corporate default are classified as _____ costs. midterm
In general, the capital structures used by U.S. firms:
In general, the capital structures used by U.S. firms:
One of the indirect costs of bankruptcy is the incentive for managers to take large risks.
When following this strategy:
One of the indirect costs of bankruptcy is the incentive for managers to take large risks. When following this strategy:
