罗斯公司理财题库cha17Word文件下载.docx

罗斯公司理财题库cha17Word文件下载.docx

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2.Thecostsofavoidingabankruptcyfilingbyafinanciallydistressedfirmareclassifiedas

costs.

B.directbankruptcy

C.indirectbankruptcy

D.financialsolvency

E.capitalstructure

3.Theexplicitandimplicitcostsassociatedwithcorporatedefaultarereferredtoasthe costsofafirm.

B.defaultbeta

E.financialdistress

4.Indirectcostsoffinancialdistress:

A.effectivelylimittheamountofequityafirmissues.

B.serveasanincentivetoincreasethefinancialleverageofafirm.

C.includedirectcostssuchaslegalandaccountingfees.

D.tendtoincreaseasthedebt-equityratiodecreases.

E.includethecostsincurredbyafirmasittriestoavoidseekingbankruptcyprotection.

.

5.Thelegalproceedingforliquidatingorreorganizingafirmoperatingindefaultiscalleda:

A.tenderoffer.

B.bankruptcy.

C.merger.

D.takeover.

E.proxyfight.

6.Thevalueofafirmismaximizedwhenthe:

A.costofequityismaximized.

B.taxrateiszero.

C.leveredcostofcapitalismaximized.

D.weightedaveragecostofcapitalisminimized.

E.debt-equityratioisminimized.

7.Theoptimalcapitalstructurehasbeenachievedwhenthe:

A.debt-equityratioisequalto1.

B.weightofequityisequaltotheweightofdebt.

C.costofequityismaximizedgivenapre-taxcostofdebt.

D.debt-equityratioissuchthatthecostofdebtexceedsthecostofequity.

E.debt-equityratioselectedresultsinthelowestpossibleweighedaveragecostofcapital.

8.Inaworldwithtaxesandfinancialdistress,whenafirmisoperatingwiththeoptimalcapitalstructure:

I.thedebt-equityratiowillalsobeoptimal.

II.theweightedaveragecostofcapitalwillbeatitsminimalpoint.

III.therequiredreturnonassetswillbeatitsmaximumpoint.

IV.theincreasedbenefitfromadditionaldebtisequaltotheincreasedbankruptcycostsofthatdebt.

A.IandIVonly

B.IIandIIIonly

C.IandIIonly

D.II,III,andIVonly

E.I,II,andIVonly

9.Theoptimalcapitalstructurewilltendtoincludemoredebtforfirmswith:

A.thehighestdepreciationdeductions.

B.thelowestmarginaltaxrate.

C.substantialtaxshieldsfromothersources.

D.lowerprobabilityoffinancialdistress.

E.lesstaxableincome.

10.Theoptimalcapitalstructureofafirm themarketedclaimsand thenonmarketedclaimsagainstthecashflowsofthefirm.

A.minimizes;

minimizes

B.minimizes;

maximizes

C.maximizes;

D.maximizes;

E.equates;

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11.Theoptimalcapitalstructure:

A.willbethesameforallfirmsinthesameindustry.

B.willremainconstantovertimeunlessthefirmmakesanacquisition.

C.ofafirmwillvaryovertimeastaxesandmarketconditionschange.

D.placesmoreemphasisontheoperationsofafirmratherthanthefinancingofafirm.

E.isunaffectedbychangesinthefinancialmarkets.

12.ThebasiclessonofMMtheoryisthatthevalueofafirmisdependentuponthe:

A.capitalstructureofthefirm.

B.totalcashflowsofthefirm.

C.percentageofafirmtowhichthebondholdershaveaclaim.

D.taxclaimplacedonthefirmbythegovernment.

E.sizeofthestockholdersclaimsonthefirm.

13.CorporationsintheU.S.tendto:

A.minimizetaxes.

B.underutilizedebt.

C.relylessonequityfinancingthantheyshould.

D.haveextremelyhighdebt-equityratios.

E.relymoreheavilyonbondsthanstocksasthemajorsourceoffinancing.

14.Ingeneral,thecapitalstructuresusedbyU.S.firms:

A.tendtooverweighdebtinrelationtoequity.

B.areeasilyexplainedintermsofearningsvolatility.

C.areeasilyexplainedbyanalyzingthetypesofassetsownedbythevariousfirms.

D.tendtobethosewhichmaximizetheuseofthefirm'

savailabletaxshelters.

E.varysignificantlyacrossindustries.

15.TheMMtheorywithtaxesimpliesthatfirmsshouldissuemaximumdebt.Inpractice,thisisnottruebecause:

A.debtismoreriskythanequity.

B.bankruptcyisadisadvantagetodebt.

C.firmswillincurlargeagencycostsofshorttermdebtbyissuinglongtermdebt.

D.BothAandB.

E.BothBandC.

16.Althoughtheuseofdebtprovidestaxbenefitstothefirm,debtalsoputspressureonthefirmto:

A.meetinterestandprincipalpaymentswhich,ifnotmet,canputthecompanyintofinancialdistress.

B.makedividendpaymentswhichifnotmetcanputthecompanyintofinancialdistress.

C.meetbothinte