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Questions and Answers
What could result in significant changes in a firm's book value equity?
What could result in significant changes in a firm's book value equity?
- A change in the general level of interest rates
- A reduction in its default risk
- A decrease in interest rates
- High profits or losses (correct)
Why might a firm's debt's market value change?
Why might a firm's debt's market value change?
- Due to a decrease in the firm's default risk
- Due to a change in the firm's profitability
- Due to a change in the firm's market value
- Due to a change in the general level of interest rates (correct)
What is a possible reason for a firm to deliberately take management actions to change its capital structure?
What is a possible reason for a firm to deliberately take management actions to change its capital structure?
- To increase its default risk
- To move its actual capital structure towards its target (correct)
- To reduce its profitability
- To maintain its current market value
What is a potential outcome of a change in a firm's stock price?
What is a potential outcome of a change in a firm's stock price?
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What is a possible way for a firm's capital structure to change without any deliberate management actions?
What is a possible way for a firm's capital structure to change without any deliberate management actions?
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