Quiz Ch 19 – Impact of Lowering Debt-Equity Ratio on Firm Characteristics
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
What aspects of the firm can be affected by reducing the debt-equity ratio?
What aspects of the firm can be affected by reducing the debt-equity ratio?
True or false: Enterprise zone subsidies usually enhance APV.
True or false: When adapting WACC for alterations in debt ratios, use the following formula in the second step: rE = r + (r − rD) × (D/V).
What strategy offers an identical payoff to buying both the stock and the put option on the stock?
What action is comparable to buying a call option, investing the present value of the exercise price in T-bills, and short-selling the underlying share?
What is the geometric connection between the position diagram for a put option and the diagram for a call option on the same stock, considering they share the same exercise price and maturity?
How does the put-call parity relation change if the stock pays a dividend before the expiration date?
What is the investment value on the final exercise date when the stock price is below the exercise price if an investor owns one share of stock and a put option?
What is the investment’s value on the final exercise date if an investor holds one share of stock, a put option, and has also sold a call option on the same stock with an identical exercise price?
Who among the investors would be content with a significant surge in the stock price?