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79. What is the expected rate of return to equityholders if the firm has a tax rate of 35%, an
interest rate on debt of 10%, a WACC of 15%, and a debt-asset ratio of 60%?
80. When corporate taxes and the cost of financial distress are taken into consideration, the
market value of a firm is equal to the value of the all-equity firm _____ the PV of the tax shield
_____ the costs of financial distress.
81. Which one of the following is a safe assumption for a firm in which the PV of the tax
shield is approximately equal to the PV of the financial distress costs?
82. Which one of the following lists presents the order of financing from
most
preferred to
least
preferred according to the pecking-order theory?
83. Debt may be the preferred form of
external financing
for many firms because:
84. Which one of the following statements is
false
regarding MM's proposition I?
85. Debt usage will have an effect on:
86. Leverage will _____ shareholders' expected return and ______ their risk.
87. Calculate the firm's expected return on its assets if its expected return on debt is 10%, its
expected return on equity is 20%, and its WACC is 14%.
88. A firm with a debt-equity ratio of 0.5, a return on assets of 14%, and a return on debt of
8%, will have a return on equity of:
89. As the debt-equity ratio decreases when debt is
not
risk free:
90. One advantage of debt financing over equity financing is the:
91. Those who benefit from the interest tax shield are:
92. When a corporation issues permanent debt, the value of all its securities:
93. When corporate taxes are considered, how does leverage affect the WACC?
94. The optimal capital structure occurs when:
95. The possibility of bankruptcy will do all of the following
except
:
96. Costs of financial distress are greater when a firm increases its:
97. Which one of the following statements is true regarding the trade-off theory?
98. According to the trade-off theory, capital structure is a trade-off between:
99. The pecking-order theory suggests that less profitable firms borrow more because:
100. Firms in which one of the following industries are most apt to have the highest debt
ratios?
101. Which one of these statements corresponds to MM proposition I without taxes?
102. Which one of these statements correctly applies to an unlevered firm that pays no taxes?
103. Which one of these is a disadvantage to tax-paying individual investors?
104. An increase in a corporation's tax rate will cause:
