Capital Structure
Check your knowledge about different capital structure theories and their assumptions
Debt is cheaper than equity because
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The presence of which one of the following costs is not used as a major argument against the M&M arbitrage process?
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The cost of capital for a firm -- when we allow for taxes, bankruptcy, and agency costs -- remains constant with increasing levels of financial leverage.
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The discount rate used to determine the present value of a stream of expected future cash flows is referred to as the __________.
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The Modigliani-Miller theory says that
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The term "capital structure" refers to:
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A critical assumption of the net operating income (NOI) approach to valuation is:
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The existence of __________ on the balance sheet generates tax advantages that directly influence the capital structure of the firm.
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The traditional approach towards the valuation of a company assumes:
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Two firms that are virtually identical except for their capital structure are selling in the market at different values. According to M&M
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The cost of capital is best calculated with:
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When the manager of a firm uses capital structure changes to convey information about the profitability and risk of the firm, then the manager is engaging in __________.
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Which of the following statements regarding the net operating income approach is incorrect?
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The traditional approach towards the valuation of a company assumes that __________.
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