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1. According to the static theory of capital structure, a firm borrows up to which one of the following points?

a. points where the firm is financed totally with debt.

b. point where an additional dollar of debt would have a benefit exactly equal to its cost.

c. point where WACC equals the debt-equity ratio

d. point where the debt-equity ratio equals 1.0

2. According to M&M proposition i with taxes, the value of a levered firm is equal to the value of the unlevered firm plus which one of the following?

a. Current market value of the debt

b. par value of the debt

c. present value of the depreciation tax shield

d. present value of the interest tax shield

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92865587

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