Basic Finance W9b (MIT)

What is the value of Bavarian Brew before restructuring? Assume no corporate taxes.

What is the value of Bavarian Brew before restructuring? Assume a corporate tax rate of 30%.

What is the value of Bavarian Brew after restructuring? Assume no corporate taxes.

What is the value of Bavarian Brew after restructuring? Assume corporate taxes of 30%.

What is the present value of Bavarian Brew's debt tax shield after the restructuring? Assume corporate taxes of 30%.

What is Bavarian Brew's required return on equity before the restructuring? Assume no corporate taxes.

What is the Bavarian Brew's required return on levered equity after the restructuring?

The uncertainty caused by the variability of a company's cash flows is called:

• financial risk

• business risk

• financial leverage

• agency cost

Which of the following is considered an indirect cost of bankruptcy?

• Document printing expenses

• Professional fees paid to lawyers

• Loss of key employees

• Travel expenses by board of directors

Which of the following is considered a direct cost of bankruptcy?

• Diversion of management's time

• Constrained capital investment spending

• Lost sales

• Professional fees paid to lawyers