Interest enables financial leverage to increase firm value

Assignment Help Financial Management

Reference no: EM131831520

1. Granting a tax deduction for corporate interest enables financial leverage to increase a firm's value by:

a. increasing EBIT.

b. decreasing the lender's share of EBIT.

c. decreasing the government's share of EBIT.

d. b and c

2. Which of the following is most correct?

a. When the return on capital employed (ROCE) is less than the before tax cost of debt, a company can increase its ROE by trading out equity and into debt.

b. When the return on capital employed (ROCE) is less than the after tax cost of debt, a company can increase its ROE by trading out equity and into debt.

c. When the return on capital employed (ROCE) is more than the before tax cost of debt, a company can increase its ROE by trading out equity and into debt.

d. When the return on capital employed (ROCE) is more than the after tax cost of debt, a company can increase its ROE by trading out equity and into debt.

Reference no: EM131831520

Questions Cloud

Determine the mean number of times the machine : Determine the mean number of times the machine was used per day.

Determine the amounts that marshall company would report : Determine the amounts that Marshall Company would report in its postacquisition balance sheet. In preparing the postacquisition balance sheet

Discuss how globalization has changed the way firms : Discuss how globalization has changed the way firms within the Kingdom of Saudi Arabia operate today. What key concepts are most important

Did economists correctly predict the outcome of the brexit : a. Did economists correctly predict the outcome of the Brexit vote? Why or why not? b. What were the economic reasons for why British citizens voted

Interest enables financial leverage to increase firm value : Granting a tax deduction for corporate interest enables financial leverage to increase a firm's value by:

What is the role of social responsibility in finance : What is the role of social responsibility in finance for Michael Milken, Ivan Boesky and Martha Stewart

How the organization seeks to gain a competitive advantage : Examine the different types of technologies applied to LensCrafters' service operations and evaluate how the technologies strengthen the value chain.

Why do customs or laws make it difficult : Why do customs or laws make it difficult to achieve this one principle? Post your comment with the rationale or an example why the principle you listed

Present the empirical evidence : In this section you should present the empirical evidence and with the help of some microeconomic tools, you should explain rationally what happens in reality.

User Account

All Pages