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    Umidjon Yusupov
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    Market risk b. Systematic risk c. Extrinsic risk d. Business risk e. Financial risk. Explicit costs, such as legal and administrative expenses, associated with corporate default are classified as _____ costs. Optimal capital structure has been achieved when: a. Debt-equity ratio is equal to 1 weight of equity is equal to the weight of debt cost of debt exceeds cost of equity.

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    Market risk b. Systematic risk c. Extrinsic risk d. Business risk e. Financial risk. Explicit costs, such as legal and administrative expenses, associated with corporate default are classified as _____ costs. Optimal capital structure has been achieved when: a. Debt-equity ratio is equal to 1 weight of equity is equal to the weight of debt cost of debt exceeds cost of equity.

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    296 views3 pages

    Chapter 16

    Uploaded by

    Umidjon Yusupov
    Market risk b. Systematic risk c. Extrinsic risk d. Business risk e. Financial risk. Explicit costs, such as legal and administrative expenses, associated with corporate default are classified as _____ costs. Optimal capital structure has been achieved when: a. Debt-equity ratio is equal to 1 weight of equity is equal to the weight of debt cost of debt exceeds cost of equity.

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    of 3

    Whichoneofthefollowingistheequityriskthatismostrelatedtothedailyoperationsofafirm? Answer a. marketrisk b. systematicrisk c. extrinsicrisk d. businessrisk e.

    financialrisk

    Whichoneofthefollowingistheequityriskrelatedtoafirm'scapitalstructurepolicy? Answer a. market b. systematic c. extrinsic d. business e. financial

    Theexplicitcosts,suchaslegalandadministrativeexpenses,associatedwithcorporatedefaultareclassifiedas_____costs. Answer a. flotation b. issue c. directbankruptcy d. indirectbankruptcy e. unlevered

    Thecostsincurredbyabusinessinanefforttoavoidbankruptcyareclassifiedas_____costs. Answer a. flotation b. directbankruptcy c. indirectbankruptcy d. financialsolvency e. capitalstructure

    A firm should select the capital structure that: Answer a. producesthehighestcostofcapital b. maximizesthevalueofthefirm c. minimizestaxes d. isfullyunlevered e. equatesthevalueofdebtwiththevalueofequity

    Theoptimalcapitalstructurehasbeenachievedwhenthe:

    Answer a. b. c. d. e. debt-equityratioisequalto1 weightofequityisequaltotheweightofdebt costofequityismaximizedgivenapre-taxcostofdebt debt-equityratioissuchthatthecostofdebtexceedsthecostofequity debt-equityratioresultsinthelowestpossibleweightedaveragecostofcapital

    Whichofthefollowingstatementsrelatedtofinancialriskarecorrect? I. Financial risk is the risk associated with the use of debt financing. II. As financial risk increases so too does the cost of equity. III. Financial risk is wholly dependent upon the financial policy of a firm. IV. Financial risk is the risk that is inherent in a firm's operations. Answer a. IandIIIonly b. IIandIVonly c. IIandIIIonly d. I,IIandIIIonly e. I,II,IIIandIV

    Thecapitalstructurethatmaximizesthevalueofafirmalso: Answer a. minimizesfinancialdistresscosts b. minimizesthecostofcapital c. maximizesthepresentvalueofthetaxshieldondebt d. maximizesthevalueofthedebt e. maximizesthevalueoftheunleveredfirm

    Theoptimalcapitalstructure: Answer a. willbethesameforallfirmsinthesameindustry b. willremainconstantovertimeunlessthefirmchangesitsprimaryoperations c. willvaryovertimeastaxesandmarketconditionschange d. placesmoreemphasisonoperationsthanonfinancing e. is unaffected by changes in the financial markets

    aultareclassifiedas_____costs.

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