Transaction costs have no effect on capital structure

Assignment Help Financial Management
Reference no: EM13948102

Which of the following statements is false?

The most important insight regarding capital structure goes back to Modigliani and Miller: With perfect capital markets, a firm's security choice alters the risk of the firm’s equity, but it does not change its value or the amount it can raise from outside investors.

When agency costs are significant, short-term debt may be the most attractive form of external financing.

Transaction costs have no effect on capital structure.

Of all the different possible imperfections that drive capital structure, the most clear-cut, and possibly the most significant, is taxes.

Reference no: EM13948102

Questions Cloud

How can stereotyping negatively affect diversity : How can stereotyping negatively affect diversity in organizations? What can individuals and organizations do to reduce people's propensity to stereotype and to act on stereotypes?
Deposited the amounts end of year deposit : You have been depositing money at the end of each year into an account drawing 8% interest. what is the balance in the account at the end of year four if you deposited the following amounts end of year deposit
Develop prototype-based on the forecasted cash flows : Conch Republic spent $750,000 to develop a prototype for a new smart phone that has all the features of the existing model, but adds new features such as WiFi tethering. Please identify the relevant cash flows to analyze this project. Based on the fo..
Compare the participation rates employment levels : Compare the participation rates, employment levels, and income levels of Blacks in the United States with those of Whites in the United States.
Transaction costs have no effect on capital structure : The most important insight regarding capital structure goes back to Modigliani and Miller: With perfect capital markets, a firm's security choice alters the risk of the firm’s equity, but it does not change its value or the amount it can raise from o..
Establish an improved product image and reputation : Products with better quality will help establish an improved product image and reputation, allowing the division to capture new customers and increase market share.
Providing an additional layer of management oversight : Leverage can reduce the degree of managerial entrenchment because managers are more likely to be fired when a firm faces financial distress. When a firm is highly levered, creditors themselves will closely monitor the actions of managers, providing a..
Oriented fiber-reinforced composite : For a continuous and oriented fiber- reinforced composite, the moduli of elasticity in the longitudinal and transverse directions. Calculate the actual loads carried by both fiber and matrix phases.
Positive-npv projects : A type of agency problem that results in shareholders gaining by choosing not to finance new, positive-NPV projects is:

Reviews

Write a Review

Financial Management Questions & Answers

  Characteristic of the price of stock

Which is a characteristic of the price of stock?

  What is the dollar amount of income

London purchased a piece of real estate last year for $85,000. The real estate is now worth $103,500. If London needs to have a total return of 0.20 during the year, then what is the dollar amount of income that she needed to have to reach her object..

  How does the MIRR avoid the IRR shortcomings

What are the main differences between the NPV method and the IRR? Assumptions on reinvestment and anything else. When does the IRR give you the wrong answers? How does the MIRR avoid the IRR shortcomings?

  What home insurance coverage amount would you recommend

Michelle and Ken Dunn, both in their mid-20s, have been married for 4 years and have two preschool-age children. Ken has an accounting degree and is employed as a cost accountant at an annual salary of $62,000. They’re now renting a duplex but wish t..

  Impact of the internet on working capital management

Explain and discuss the impact of the internet on working capital management based on the textbook reading and your own experience

  How much is paid to the retailers vendor

A retailer purchases goods that have a list price of $7,500. The manufacturer allows a trade discount of 40-25-10 and a cash discount of 2/10, net 30. If the retailer takes both discounts, how much is paid to the retailer’s vendor?

  Calculate the rate of return for each these investments

You’re trying to choose between two different investments, both of which have up-front costs of $100,000. Investment G returns $165,000 in 9 years. Investment H returns $285,000 in 16 years. Calculate the rate of return for each these investments.

  Maturity risk premium

MATURITY RISK PREMIUM The real risk-free rate is 3.4%, and inflation is expected to be 3.8% for the next 2 years. A 2-year Treasury security yields 7.8%. What is the maturity risk premium for the 2-year security?

  Natural gas unit was expected to have the energy cost

At NYIT in 1993 a 100ton electric A/C system (electric driven compressor) with a 100 ton natural gas absorption system. Electric then was$. 12/kwh and the natural gas unit was expected to have the energy cost.

  Managements plans for specified future time period

The master budget includes all of the following except. A formal written statement of management’s plans for a specified future time period, expressed in financial terms is a(n). All of the following are financial budgets except the. The master budge..

  The effective cost of borrowing in this case

Your firm has an average collection period of 39 days. Current practice is to factor all receivables immediately at a 2.00 percent discount. What is the effective cost of borrowing in this case?

  Employees taxable income

One of your corporate clients has approached you about whether or not its employees are required to include certain benefits provided by the corporation in their income. In particular, the corporation has inquired whether the following benefits provi..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd