Quiz Ch 18 – Dual Pressures of Debt Usage
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
Despite the tax benefits, the adoption of debt introduces challenges for the firm. What are the pressures imposed by debt usage?
Despite the tax benefits, the adoption of debt introduces challenges for the firm. What are the pressures imposed by debt usage?
What are the key factors influencing scenarios where financial distress is a concern, and several elements impact the value of a levered firm?
Concerning financial distress, which statement(s) is (are) correct?
Why does incorporating debt into the capital structure enhance firm value with corporate taxes in consideration?
How does the limited liability feature of common equity, in comparison to a firm with unlimited liability, affect the firm?
What is the effect of incorporating restrictions into a bond contract?
Concerning the indirect costs of bankruptcy, who primarily bear these costs?
What consequences may arise from the incentive toward underinvestment in the context of bankruptcy’s indirect costs?
Which group of investors would remain indifferent, assuming no personal taxes on capital gains in a scenario where a company can allocate $1 to either debt interest or capital gains for equity investors? (Marginal corporate tax rate: 21%)
What principles does the pecking order theory of capital structure convey?