Reference no: EM131884342
When there are corporate taxes and costs of financial distress, which of the following statements are true for a firm that initially starts out with no leverage?
Select one or more answers
A. A firm's Weighted Average Costs of Capital will initially increase as the firm issues debt and buys back shares of stock due to the present value of interest tax shields. However, at high enough leverage levels, WACC start to decrease as expected costs of financial distress start to outweigh tax shield benefits.
B. A firm's equity will become increasingly risky as the firm issues debt and buys back shares of stock.
C. A firm's Weighted Average Costs of Capital will not vary with leverage as firm value and cost of capital are always independent of capital structure.
D. A firm's Optimal Capital structure will occur where its Weighted Average Cost of Capital is minimized.
E. A firm's equity will become less risky as the firm issues debt and buys back shares of stock.
F. A firm's Weighted Average Costs of Capital will initially decrease as the firm issues debt and buys back shares of stock due to the present value of interest tax shields. However, at high enough leverage levels, WACC start to increase as expected costs of financial distress start to outweigh tax shield benefits.
G. A firm's debt will become increasingly risky as the firm issues debt and buys back shares of stock.
What was the present value of O receivable
: On 12-31-13 O accepted a 3%, 6-year, $1,000,000 note in exchange for services O rendered to P. O will collect the note principle in full upon maturity.
|
Compute the standard cost of one unit of product
: Sonic, Inc. is planning to produce 2,500 units of product in 2016. Compute the standard cost of one unit of product
|
Research about the individual pieces of rhetoric
: Were there any constraints operating? You must back up any claims with research. The length of this section will vary depending on what you think is important.
|
Compute the amount of the PBO
: A company's defined benefit pension plan had a PBO of $268,000 on January 1, 2016. During 2016, pension benefits paid were $41,000.
|
The firm issues debt and buys back shares of stock
: A firm's equity will become increasingly risky as the firm issues debt and buys back shares of stock.
|
What factors do you feel define the moral values
: What Factors do you feel define the moral values you have today? Have you ever experienced a time when your ethical framework changed
|
Definition of investment banking
: Definition of Investment Banking (and why it is important)
|
How human beings use the environment
: For your initial post, propose a new environmentally-focused law. Your proposed law could be based on your views on how human beings use the environment?
|
What are variable costs
: What are variable costs? They are a cost or expense where the total changes in proportion to changes in volume or activity
|