
Chapter 2 FL 1
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Business
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University
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Ngoc Tran
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15 questions
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1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called:
Homemade leverage
Dividend recapture
The weighted average cost of capital
Private debt placement
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
The proposition that the value of the firm is independent of its capital structure is called:
The capital asset pricing model
MM Proposition I (no taxes)
MM Proposition II (no taxes)
The law of one price
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
The proposition that the cost of equity is a positive linear function of capital structure is called:
The capital asset pricing model
MM Proposition I (no taxes)
MM Proposition II (no taxes)
The law of one price
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
The tax savings of the firm derived from the deductibility of interest expense is called the:
Interest tax shield
Depreciable basis
Financing umbrella
Current yield
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
The unlevered cost of capital is:
The cost of capital for a firm with no equity in its capital structure
The cost of capital for a firm with no debt in its capital structure
The interest tax shield times pretax net income
The cost of preferred stock for an all-equity firm
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
The firm's capital structure refers to the:
Mix of current and fixed assets a firm holds
Amount of capital invested in the firm
Amount of dividends a firm pays
Mix of debt and equity used to finance the firm's assets
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
A general rule for managers to follow is to set the firm's capital structure such that the firm's:
Size is maximized
Value is maximized
Bondholders are secured
Suppliers of raw materials are satisfied
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