A) is typically higher than the cost of preferred stock B) must be adjusted to an after-tax cost C) is higher than the cost of retained earnings D) is the lowest component cost because corporations can deduct 70 percent of the interest expense A) is typically higher than the cost of preferred stock B) must be adjusted to an after-tax cost C) is higher than the cost of retained earnings D) is the lowest component cost because corporations can deduct 70 percent of the interest expense

Exam 18: Capital Structure and the Cost of Capital

The EPS/EBIT indifference level represents the level of EBIT at which the firm would be indifferent between two different capital structures because they both result in the same level of EPS.

(True/False)

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Question 61

Which of the following securities have voting rights?

(Multiple Choice)

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Question 62

A firm's business risk is measured by the variability in which one of the following over time:

(Multiple Choice)

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Question 63

All of the following statements are correct except:

(Multiple Choice)

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Question 64

All of the following statements are correct except:

(Multiple Choice)

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Question 65

A company experienced a 12 % increase in earnings before interest and taxes and a 3 % increase in sales. What is the degree of operating leverage for this company?

(Multiple Choice)

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Question 66

Smith Company has a degree of operating leverage of 5, while an industry competitor, Johnson Company, has a degree of operating leverage of 2. Supplied with this knowledge, pick the response below that is most typical of Johnson Company.

(Multiple Choice)

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Question 67

The firm's unadjusted cost of debt financing equals the yield to maturity on new debt issues.

(True/False)

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Question 68

The estimate of how quickly a firm may grow by maintaining a constant mix of debt and equity is called:

(Multiple Choice)

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Question 69

The retained earnings rate is the proportion of each dollar of earnings per share that is retained by the firm.

(True/False)

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Question 70

All of the following statements are correct except:

(Multiple Choice)

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Question 71

Which of the following is not an influence affecting a firm's capital structure choices?

(Multiple Choice)

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Question 72

A firm with a DOL of 2, and no preferred stock, and no long-term debt will have a DCL of:

(Multiple Choice)

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Question 73

The firm's capital structure is the mix of debt and equity used to finance its assets.

(True/False)

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Question 74

Business risk is measured by the degree of financial leverage.

(True/False)

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Question 75

All of the following methods can be used to estimate the cost of debt except:

(Multiple Choice)

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Question 76

The cost of debt:

(Multiple Choice)

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Question 77

The sustainable growth rate measures how quickly a firm can increase its asset base over the next year without raising outside funds.

(True/False)

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Question 78

Operating leverage is affected by such items as rental payments, contractual employee salaries, and general and administrative overhead expenses.

(True/False)

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Question 79

EBIT/EPS analysis allows managers to see how different capital structures affect the earnings levels of their firms.

(True/False)

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Question 80

Showing 61 - 80 of 155

The EPS/EBIT indifference level represents the level of EBIT at which the firm would be indifferent between two different capital structures because they both result in the same level of EPS.

Which of the following securities have voting rights?

A firm's business risk is measured by the variability in which one of the following over time:

All of the following statements are correct except:

All of the following statements are correct except:

A company experienced a 12 % increase in earnings before interest and taxes and a 3 % increase in sales. What is the degree of operating leverage for this company?

Smith Company has a degree of operating leverage of 5, while an industry competitor, Johnson Company, has a degree of operating leverage of 2. Supplied with this knowledge, pick the response below that is most typical of Johnson Company.

The firm's unadjusted cost of debt financing equals the yield to maturity on new debt issues.

The estimate of how quickly a firm may grow by maintaining a constant mix of debt and equity is called:

The retained earnings rate is the proportion of each dollar of earnings per share that is retained by the firm.

All of the following statements are correct except:

Which of the following is not an influence affecting a firm's capital structure choices?

A firm with a DOL of 2, and no preferred stock, and no long-term debt will have a DCL of:

The firm's capital structure is the mix of debt and equity used to finance its assets.

Business risk is measured by the degree of financial leverage.

All of the following methods can be used to estimate the cost of debt except:

The cost of debt:

The sustainable growth rate measures how quickly a firm can increase its asset base over the next year without raising outside funds.

Operating leverage is affected by such items as rental payments, contractual employee salaries, and general and administrative overhead expenses.

EBIT/EPS analysis allows managers to see how different capital structures affect the earnings levels of their firms.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

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