Quiz Ch 16 – Effects of Increased Corporate Tax Rate
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
What happens when a corporation’s tax rate increases?
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?
Under what circumstances are firms more inclined to limit their borrowing?
Why does financial leverage elevate shareholder risk?
Why can leverage raise expected earnings per share while leaving the share price unaltered according to MM?
In the trade-off theory, if the present value of the interest tax shield on debt matches the present value of the costs of financial distress, what does this suggest?
What occurs when debt is considered risky?
What is an implicit cost associated with incorporating debt into a firm’s capital structure?
What is an accurate statement concerning the trade-off theory?