Chapter 16
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
|
|
||||
---|---|---|---|---|---|
A company should select the capital structure that _____ | show 🗑
|
||||
show | it increases the value of the firm
🗑
|
||||
The value of the firm is maximized when the weighted average cost of capital (WACC) is _____. | show 🗑
|
||||
The value of a firm is equal to the value of its _____. | show 🗑
|
||||
Financial leverage affects the performance of a firm because the range of possible values for ___. | show 🗑
|
||||
show | the firm's mix of debt and equity
🗑
|
||||
Volatility or ______ increases for equity holders when leverage increases. | show 🗑
|
||||
show | the firm's value is maximized
🗑
|
||||
An individual can duplicate a levered firm through a strategy called ____ where the investor uses his own funds plus borrowed funds to buy stocks. | show 🗑
|
||||
show | minimized
🗑
|
||||
According to M&M Proposition I, a firm's capital structure choices _____. | show 🗑
|
||||
______ is the term that describes the capital structure when debt is used to finance assets. | show 🗑
|
||||
An investor who invests in the stock of a levered firm rather than in an all-equity firm will require: | show 🗑
|
||||
Which of the following statements are true regarding the effect of financial leverage and the firm's operating earnings? | show 🗑
|
||||
Under M&M Proposition II with no taxes, the weighted average cost of capital is invariant to the debt level because ___. | show 🗑
|
||||
The expected return on equity is _____ to leverage. | show 🗑
|
||||
Which of the following are generally true about the cost of equity and the cost of debt? | show 🗑
|
||||
With ____, an investor is able to replicate a corporation's capital structure by borrowing funds and using those funds along with her own money to buy the company's stock. | show 🗑
|
||||
The equity risk that comes from the nature of a firm's operating activities is known as _____ risk. | show 🗑
|
||||
show | MM demonstrated that debt financing is neither better nor worse than equity financing in the absence of taxes
the asset to be financed is the same
🗑
|
||||
show | false
🗑
|
||||
show | the cost of equity rises with leverage.
🗑
|
||||
In 2019, the net interest deduction is limited to what percent of EBITDA? | show 🗑
|
||||
show | the overall cost of capital cannot be reduced
as debt is added, the equity becomes more risky
🗑
|
||||
When calculating the cash flow for a levered firm, you must consider _____. | show 🗑
|
||||
The WACC is the cost of ______ times its weight in the capital structure plus the cost of ______ times its weight in the capital structure | show 🗑
|
||||
show | It provides a tax benefit.
🗑
|
||||
The equity risk that comes from the financial policy or capital structure decisions of the firm is known as _____ risk. | show 🗑
|
||||
show | Value of Levered Firm = Value of Unlevered Firm + Tax Benefit of Debt
🗑
|
||||
An unlevered firm ____. | show 🗑
|
||||
In the presence of corporate taxes, the tax shield effect of debt will ____ the value of the firm. | show 🗑
|
||||
According to the Tax Cuts and Jobs Act of 2017, after 2021, the net interest deduction drops to what percent of EBIT? | show 🗑
|
||||
show | lower.
🗑
|
||||
show | Corporate tax rates are zero.
The corporation has no debt.
The corporation is an all-equity fir
🗑
|
||||
Which of these statements is true regarding corporate capital structures? | show 🗑
|
||||
show | plus the tax rate times the value of debt
🗑
|
||||
show | levered firms pay lower taxes than unlevered firms
🗑
|
Review the information in the table. When you are ready to quiz yourself you can hide individual columns or the entire table. Then you can click on the empty cells to reveal the answer. Try to recall what will be displayed before clicking the empty cell.
To hide a column, click on the column name.
To hide the entire table, click on the "Hide All" button.
You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
If you know all the data on any row, you can temporarily remove it by tapping the trash can to the right of the row.
To hide a column, click on the column name.
To hide the entire table, click on the "Hide All" button.
You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
If you know all the data on any row, you can temporarily remove it by tapping the trash can to the right of the row.
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Created by:
agordon93