Corporate Finance 10th Edition test bank ch17

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1、ch17Student:1.Theexplicitcosts,suchasthelegalexpenses,associatedwithcorporatedefaultareclassifiedascosts.A.flotationB.betaconversionC.directbankruptcyD.indirectbankruptcyE.unlevered2.Thecostsofavoidingabankruptcyfilingbyafinanciallydistressedfirmareclassifiedasc

2、osts.A.flotationB.directbankruptcyC.indirectbankruptcyD.financialsolvencyE.capitalstructure3.Theexplicitandimplicitcostsassociatedwithcorporatedefaultarereferredtoasthecostsofafirm.A.flotationB.defaultbetaC.directbankruptcyD.indirectbankruptcyE.financialdistress

3、4.Indirectcostsoffinancialdistress:A.effectivelylimittheamountofequityafirmissues.B.serveasanincentivetoincreasethefinancialleverageofafirm.C.includedirectcostssuchaslegalandaccountingfees.D.tendtoincreaseasthedebt-equityratiodecreases.E.includethecostsincurredb

4、yafirmasittriestoavoidseekingbankruptcyprotection.5.Thelegalproceedingforliquidatingorreorganizingafirmoperatingindefaultiscalleda:A.tenderoffer.B.bankruptcy.C.merger.D.takeover.E.proxyfight.6.Thevalueofafirmismaximizedwhenthe:A.costofequityismaximized.B.taxrate

5、iszero.C.leveredcostofcapitalismaximized.D.weightedaveragecostofcapitalisminimized.E.debt-equityratioisminimized.7.Theoptimalcapitalstructurehasbeenachievedwhenthe:A.debt-equityratioisequalto1.B.weightofequityisequaltotheweightofdebt.C.costofequityismaximizedgiv

6、enapre-taxcostofdebt.D.debt-equityratioissuchthatthecostofdebtexceedsthecostofequity.E.debt-equityratioselectedresultsinthelowestpossibleweighedaveragecostofcapital.8.Inaworldwithtaxesandfinancialdistress,whenafirmisoperatingwiththeoptimalcapitalstructure:I.thed

7、ebt-equityratiowillalsobeoptimal.II.theweightedaveragecostofcapitalwillbeatitsminimalpoint.III.therequiredreturnonassetswillbeatitsmaximumpoint.IV.theincreasedbenefitfromadditionaldebtisequaltotheincreasedbankruptcycostsofthatdebt.A.IandIVonlyB.IIandIIIonlyC.Ian

8、dIIonlyD.II,III,andIVonlyE.I,II,andIVonly9.Theoptimalcapitalstructurewilltendtoincludemoredebtforfirmswith:A.thehighestdepreciationdeductions.B.thelowestmarginaltaxra