The _ hypothesis posits that a firm may choose high leverage as a competitive strategy to either win market share from rivals or to deter entry into the industry. a. long-purse b. strategic capital structure c. competitive leverage d. leverage aggressiveness ANSWER D
Date: September 19th, 2020
What is an incremental cash flow for a project? What concepts do we need to examine to help understand how to estimate the incremental cash flow of a project? What else is needed for deciding whether or not to choose a project? What will be an ideal response? ANSWER Answer: The incremental cash […]
Date: September 19th, 2020
The output of the capital budgeting decision models is only as good as the inputs that go into them. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
The six financial decision models that you studied in Chapter 9 are valid only if one has the proper incremental cash flow for the project under consideration. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
If an asset’s disposal value is greater than its current book value, a gain on disposal occurs. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
The ________ is the cost of each financing component multiplied by that component’s percent of the total funding amount. A) NPV B) IRR C) cost of capital D) cost of debt ANSWER Answer: C
Date: September 19th, 2020
Which of the following is a basic source of capital for a firm? A) short-term debt B) discounts from suppliers C) current liabilities D) common stock ANSWER D
Date: September 19th, 2020
A decrease in fixed financial costs will result in a(n)________. A) increase in financial risk B) decrease in financial risk C) increase in operating leverage D) decrease in operating leverage ANSWER B
Date: September 19th, 2020
Holding all other factors constant, a firm that is subject to a greater level of business risk should employ less total leverage than an otherwise equivalent firm that is subject to a lesser level of business risk. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The tradeoff in the traditional tradeoff theory of optimal capital structure is between: a. agency costs of debt and information asymmetry costs of debt. b. the tax benefit of debt and the expected costs of future financial distress. c. the tax benefit of debt and agency costs of debt. ANSWER B
Date: September 19th, 2020
