Quiz Ch 18 – T/F Fixed Asset Acquisition and Excess Capacity
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
True or false: The choice to acquire fixed assets is independent of the existing level of excess capacity.
True or false: The choice to acquire fixed assets is independent of the existing level of excess capacity.
True or false: The presence of personal taxes on interest income and equity income will consistently enhance the advantage of debt for a firm.
True or false: Firms on the brink of bankruptcy are inclined to issue debt with higher risk.
True or false: Small capital investment projects are typically excluded from a financial plan.
True or false: Financial planning models regularly account for present value and risk factors.
True or false: In the presence of financial distress costs, the value of a levered firm is determined by adding the unlevered firm value, the present value of tax shields, and subtracting the present value of financial distress costs.
True or false: For a levered firm with permanent debt level D, the value is the sum of the unlevered firm value and (TC)(D), assuming no financial distress costs.
True or false: A common practice in corporate financial planning involves looking ahead for a period of at least 15 to 20 years.
True or false: Long-term planning typically encompasses a 5-year timeframe.
True or false: In MM’s Proposition I adjusted for corporate taxes, the value of the levered firm is the sum of the value of the unlevered firm and the present value of the tax shield.