The interest tax shield has no value for firm

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1. If you believe the US dollar will get stronger over the next year compared to the Japanese Yen, which of the following positions should you take in the financial markets at time 0:

(a) A short forward contract on USD/JPY at a major trading bank that offers forward contracts.

(b) Entering a long futures contract on USD/JPY at the CME group.

(c) Convertying a large amount of dollars to Japanese Yen.

(d) None of the above

Explain why that choice is the best available.

2. The interest tax shield has no value for a firm when the

1 tax rate is equal to zero.

2 debt-equity ratio is exactly equal to one.

3 firm is levered.

4 firm elects an all-equity capital structure.

Reference no: EM131981853

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