Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Homework Help/Study Tips Expert

Answer the given five problems on a separate document. Describe how you reached the answer or show your work if a mathematical calculation is required, or both.

1. The firm's target capital structure should be consistent with which of the following statements?

a. Minimize the cost of debt (rd).
b. Obtain the highest possible bond rating.
c. Minimize the cost of equity (rs).
d. Minimize the weighted average cost of capital (WACC).
e. Maximize the earnings per share (EPS).

2. Which of the following statements is CORRECT?

a. The factors that affect a firm's business risk are affected by industry characteristics and economic conditions. Unfortunately, these factors are generally beyond the control of the firm's management.
b. One of the benefits to a firm of being at or near its target capital structure is that this eliminates any risk of bankruptcy.
c. A firm's financial risk can be minimized by diversification.
d. The amount of debt in its capital structure can under no circumstances affect a company's business risk.
e. A firm's business risk is determined solely by the financial characteristics of its industry.

3. Which of the following statements is CORRECT? As a firm increases the operating leverage used to produce a given quantity of output, this will

a. normally lead to a decrease in its business risk.
b. normally lead to a decrease in the standard deviation of its expected EBIT.
c. normally lead to a decrease in the variability of its expected EPS.
d. normally lead to a reduction in its fixed assets turnover ratio.
e. normally lead to an increase in its fixed assets turnover ratio.

4. If debt financing is used, which of the following is CORRECT?

a. The percentage change in net operating income will be equal to a given percentage change in net income.
b. The percentage change in net income relative to the percentage change in net operating income will depend on the interest rate charged on debt.
c. The percentage change in net income will be greater than the percentage change in net operating income.
d. The percentage change in sales will be greater than the percentage change in EBIT, which in turn will be greater than the percentage change in net income.
e. The percentage change in net operating income will be greater than a given percentage change in net income.

5. Which of the following statements is CORRECT, holding other things constant?

a. An increase in the personal tax rate is likely to increase the debt ratio of the average corporation.
b. If changes in the bankruptcy code make bankruptcy less costly to corporations, then this would likely reduce the debt ratio of the average corporation.
c. An increase in the company's degree of operating leverage is likely to encourage a company to use more debt in its capital structure.
d. An increase in the corporate tax rate is likely to encourage a company to use more debt in its capital structure.
e. Firms whose assets are relatively liquid tend to have relatively low bankruptcy costs, hence they tend to use relatively little debt.

Homework Help/Study Tips, Others

  • Category:- Homework Help/Study Tips
  • Reference No.:- M915507

Have any Question? 


Related Questions in Homework Help/Study Tips

Beat the averagebullevaluate the different valuation

BEAT THE AVERAGE • Evaluate the different valuation options for real estate. Your evaluation should include an assessment of the benefits or shortcomings of each option and when they are each appropriate. Evaluation shou ...

Assignment sexual harassment in the workplacejulie has been

Assignment: Sexual Harassment in the Workplace Julie has been a nurse at Memorial Hospital for three years. During that time, she has developed productive relationships with her colleagues and has earned a reputation for ...

Alcohol has been used for many centuries and early forms of

Alcohol has been used for many centuries and early forms of mead date back to at least 8000 BC. Throughout time, alcohol has had many purposes, including disinfection, religious rituals, and medical treatments. Today, al ...

Assignmentplease answer the following questions with as

Assignment Please answer the following questions with as much detail as possible. Well- written answers will demonstrate mastery of concepts presented in the textbook, assigned articles, discussed in class and display re ...

Student autobiography worksheetanswer the following

Student Autobiography Worksheet Answer the following questions about your family's background OR a family of your choice (all that you know or can find out). When did your/their family(ies) come to the U.S.? From where d ...

Professional learning communitiesone component of the 21st

Professional Learning Communities One component of the 21st Century Professional Development framework encourages sharing knowledge with fellow faculty, using face-to-face, virtual and blended communications. When we thi ...

Assignmentfirst two highlighted questions need to be 150

Assignment First two highlighted questions need to be 150 words or more.. all others only need to be 50 words or more... Between a periodic physical inventory and a computer-track inventory, which has more value and why ...

Justice and civic life essayfrom the magna carta to many of

Justice and Civic Life Essay From the Magna Carta to many of the Constitutional Amendments, democracy has evolved over history. Throughout this semester, we have studied how the notion of individual rights have gradually ...

What is the nlrb what is its relationship to the nlra

What is the NLRB? What is its relationship to the NLRA? Lastly, what are the elements that an employee must meet to prove discrimination under the NLRA, and what must an employer show to defend against such a claim? Your ...

Case analysis of the human experiments at holmes burg

case analysis of the Human Experiments at Holmes burg Prison (1974) · Who is labile? · What kind of tort (intentional - unintentional ) · Which kind of laws had been validated in this case? · How we prevent re occurrence ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro