Quiz Ch 16 – Leverage and WACC with Corporate Taxes
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
What is the effect of changes in leverage on the Weighted Average Cost of Capital (WACC) considering corporate taxes?
What is the effect of changes in leverage on the Weighted Average Cost of Capital (WACC) considering corporate taxes?
How can a firm maximize its value in a setting with corporate taxes and no financial distress?
Which statement is in accordance with MM Proposition I when taxes are NOT considered?
In the trade-off theory of capital structure, what characterizes the optimal capital structure for any firm?
What does MM Proposition I without taxes declare?
According to the pecking-order theory, why do less profitable firms tend to borrow more?
True or false: In the absence of taxes and under efficient capital markets, a company’s market value is independent of its capital structure.
True or false: According to the trade-off theory of capital structure, firms seek an ideal balance of debt.
True or false: Once you realize that debt increases financial risk and prompts shareholders to seek higher returns, it becomes clear that debt is not a less expensive option than equity.
True or false: Restructuring should NOT impact the firm’s value even when taxes are considered, and the MM assumption of no taxes is relaxed.