Statements regarding loanable funds theory is correct

Assignment Help Financial Management

Reference no: EM131937322

1. Which of the following statements is true?

A. Financial theorists have resolved the issue of how to maximize firm value by altering the capital structure.

B. highly leveraged firm has less flexibility to take advantage of investment opportunities than companies with low debt ratios.

C. Firms with a high degree of operating leverage usually maintain high debt ratios.

D. A firm's longminus−term earnings are more important than its nearminus−term cash flows in determining the amount of debt to issue.

E. Firms increase their debt usage when markets overvalue the firm.

2. Which of the following statements regarding loanable funds theory is CORRECT?

a. As interest rates rise, the quantity of loanable funds supplied will increase.

b. As the quantity of loanable funds supplied increases, interest rates will rise.

c. As the quantity of loanable funds demanded increases, interest rates will fall.

d. As interest rates rise, the quantity of loanable funds demanded will increase.

Reference no: EM131937322

Questions Cloud

What is the total value of the company using the APV model : What is the total value of the company, using the APV model?

Cheaper on per-year basis than leasing machine : Determine if owning the machine would be cheaper on a per-year basis than leasing the machine.

Use either replacement chain or EAA and EAC analysis : You are free to use either replacement chain or EAA/EAC analysis.

Expected value of forward and money market hedges : Calculate the expected value of the forward and the money market hedges and make a recommendation.

Statements regarding loanable funds theory is correct : Which of the following statements regarding loanable funds theory is CORRECT?

Compute NPV and IRR of investment : Given that the firm’s required rate of return is 13%, compute the NPV and IRR of the investment. Should they make the investment?

What is NPV of this new investment : What is the NPV of this new investment if the firm's required rate of return is 12%? What is the IRR? Should the project be accepted?

Considering entering laser printing business : Matrix Printers, Inc. is considering entering the laser printing business. What is the NPV of making this investment if the required rate of return is 16%.

Proposed acquisition of new special-purpose truck : You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck.

User Account

All Pages