Reference no: EM132007438

1. In a world with taxes, interest tax shield tends to reduce a firm's weighted average cost of capital.

True

False

2. The interest paid by a firm is tax-deductible and is referred to as interest tax shield. This is the additional amount that a firm would have paid in taxes if it did not have any debt in its capital structure.

True

False

3. Acquisition premiums the last few years have averaged 25 to 40 percent, but sometimes exceed 100 percent; prior research suggests that high premium generally have negative impacts on acquisition performance. Explain.

True

False