罗斯公司理财题库cha17.doc

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1、Chapter17-CapitalStructure:LimitstotheUseofDebtChapter17CapitalStructure:LimitstotheUseofDebt MultipleChoiceQuestions 1. Theexplicitcosts,suchasthelegalexpenses,associatedwithcorporatedefaultareclassifiedas_____costs. A. flotationB. betaconversionC. directbankruptcyD. indirectbankruptcyE. unlever

2、ed 2. Thecostsofavoidingabankruptcyfilingbyafinanciallydistressedfirmareclassifiedas_____costs. A. flotationB. directbankruptcyC. indirectbankruptcyD. financialsolvencyE. capitalstructure 3. Theexplicitandimplicitcostsassociatedwithcorporatedefaultarereferredtoasthe_____costsofafirm. A. flotation

3、B. defaultbetaC. directbankruptcyD. indirectbankruptcyE. financialdistress 4. Indirectcostsoffinancialdistress: A. effectivelylimittheamountofequityafirmissues.B. serveasanincentivetoincreasethefinancialleverageofafirm.C. includedirectcostssuchaslegalandaccountingfees.D. tendtoincreaseasthedebt-e

4、quityratiodecreases.E. includethecostsincurredbyafirmasittriestoavoidseekingbankruptcyprotection. 17-50Chapter17-CapitalStructure:LimitstotheUseofDebt5. Thelegalproceedingforliquidatingorreorganizingafirmoperatingindefaultiscalleda: A. tenderoffer.B. bankruptcy.C. merger.D. takeover.E. proxyfight

5、. 6. Thevalueofafirmismaximizedwhenthe: A. costofequityismaximized.B. taxrateiszero.C. leveredcostofcapitalismaximized.D. weightedaveragecostofcapitalisminimized.E. debt-equityratioisminimized. 7. Theoptimalcapitalstructurehasbeenachievedwhenthe: A. debt-equityratioisequalto1.B. weightofequityise

6、qualtotheweightofdebt.C. costofequityismaximizedgivenapre-taxcostofdebt.D. debt-equityratioissuchthatthecostofdebtexceedsthecostofequity.E. debt-equityratioselectedresultsinthelowestpossibleweighedaveragecostofcapital. 8. Inaworldwithtaxesandfinancialdistress,whenafirmisoperatingwiththeoptimalcap

7、italstructure:I.thedebt-equityratiowillalsobeoptimal.II.theweightedaveragecostofcapitalwillbeatitsminimalpoint.III.therequiredreturnonassetswillbeatitsmaximumpoint.IV.theincreasedbenefitfromadditionaldebtisequaltothein