Finance theory asserts that there are no transactions costs

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1. Finance theory asserts that if there are no transactions costs, no bankruptcy costs and investment policy is fixed, then the value of the firm will not be affected by capital structure.

True or False

2. Shady Rack Inc. has a bond outstanding with 9.5 percent coupon, paid semiannually, and 19 years to maturity. The market price of the bond is $1,045.12. Calculate the bond’s yield to maturity (YTM). Now, if due to changes in market conditions, the market required YTM suddenly increases by 2% from your calculated YTM, what will be the percent change in the market price of the bond?

A. -17.09% B. -14.87% C. -17.76% D. -16.39% E. -15.66% F. -14.01%

3. The traditional financial analysis applied to foreign or domestic projects, to determine the project's value to the firm is called:

A) cost of capital analysis. B) capital budgeting. C) capital structure analysis D) agency theory

Reference no: EM132068664

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