Quiz Ch 16 – Achieving Optimal Capital Structure in the Trade-Off Theory
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
When is the optimal capital structure achieved in the context of the trade-off theory?
When is the optimal capital structure achieved in the context of the trade-off theory?
Which assumption is NOT a fundamental aspect of MM Proposition I?
Why might firms in financial distress decline positive Net Present Value (NPV) projects instead of raising new equity?
What could lead management to borrow for projects with a negative expected Net Present Value (NPV) when a financial crisis is imminent?
What does the term “financial risk” specifically refer to?
What occurs when a firm lowers its debt-equity ratio according to MM Proposition II?
What is NOT subject to change as a result of the cost of financial distress?
What happens when a corporation’s tax rate increases?
What is the impact of raising a firm’s financial leverage?
In MM’s Proposition II with risky debt, what happens to the expected return on assets as the debt-equity ratio changes?