Quiz Ch 13 – Identifying the Optimal Capital Structure from Given Information
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
Identify the optimal capital structure from the given data:
Identify the optimal capital structure from the given data:
If a firm proceeds with a recapitalization plan involving issuing long-term debt to repurchase common stock, leading to unchanged investor-supplied capital and firm size, while maintaining a 15% ROIC, what outcomes can be expected?
Within the Miller model, all else being equal, what does it suggest about the impact of personal taxes on the value of utilizing corporate debt?
What is the purpose of the firm’s target capital structure?
Which of the following statements is accurate?
True or false: Keeping other factors unchanged, companies utilizing easily sellable assets (e.g., trucks) tend to employ more debt than those with assets that are more challenging to sell (e.g., research and development-focused firms).
True or false: Varied borrowers possess distinct bankruptcy risks; in the event of borrower bankruptcy, lenders are unlikely to recover the complete loaned amount. Consequently, lenders demand higher rates from borrowers deemed more prone to bankruptcy.
True or false: Firms A and B could possess matching financial and operating leverage, while Firm A exhibits greater EPS variability due to higher business risk compared to Firm B.
True or false: Capital structure decisions are governed by the trade-off theory, which asserts that these decisions entail balancing the advantages and drawbacks of debt financing.
True or false: The discussed text states that a firm’s capital structure has no influence on its free cash flows since FCF solely encompasses operating cash flows, which are accessible for servicing debt, distributing dividends to shareholders, and other applications.