公司理财(英文版)题库15

15-1CHAPTER15CapitalStructure:BasicConceptsMultipleChoiceQuestions:I.DEFINITIONSHOMEMADELEVERAGEa1.Theuseofpersonalborrowingtochangetheoverallamountoffinancialleveragetowhichanindividualisexposediscalled:a.homemadeleverage.b.dividendrecapture.c.theweightedaveragecostofcapital.d.privatedebtplacement.e.personaloffset.Difficultylevel:EasyMMPROPOSITIONIb2.Thepropositionthatthevalueofthefirmisindependentofitscapitalstructureiscalled:a.thecapitalassetpricingmodel.b.MMPropositionI.c.MMPropositionII.d.thelawofoneprice.e.theefficientmarketshypothesis.Difficultylevel:EasyMMPROPOSITIONIIc3.Thepropositionthatthecostofequityisapositivelinearfunctionofcapitalstructureiscalled:a.thecapitalassetpricingmodel.b.MMPropositionI.c.MMPropositionII.d.thelawofoneprice.e.theefficientmarketshypothesis.Difficultylevel:MediumINTERESTTAXSHIELDa4.Thetaxsavingsofthefirmderivedfromthedeductibilityofinterestexpenseiscalledthe:a.interesttaxshield.b.depreciablebasis.c.financingumbrella.d.currentyield.e.tax-losscarryforwardsavings.Difficultylevel:Easy15-2UNLEVEREDCOSTOFCAPITALb5.Theunleveredcostofcapitalis:a.thecostofcapitalforafirmwithnoequityinitscapitalstructure.b.thecostofcapitalforafirmwithnodebtinitscapitalstructure.c.theinteresttaxshieldtimespretaxnetincome.d.thecostofpreferredstockforafirmwithequalpartsdebtandcommonstockinitscapitalstructure.e.equaltotheprofitmarginforafirmwithsomedebtinitscapitalstructure.Difficultylevel:EasyWEIGHTEDAVERAGECOSTOFCAPITALe6.Thecostofcapitalforafirm,rWACC,inazerotaxenvironmentis:a.equaltotheexpectedearningsdividedbymarketvalueoftheunleveredfirm.b.equaltotherateofreturnforthatbusinessriskclass.c.equaltotheoverallrateofreturnrequiredontheleveredfirm.d.isconstantregardlessoftheamountofleverage.e.Alloftheabove.Difficultylevel:MediumBALANCESHEETd7.Thedifferencebetweenamarketvaluebalancesheetandabookvaluebalancesheetisthatamarketvaluebalancesheet:a.placesassetsontherighthandside.b.placesliabilitiesonthelefthandside.c.doesnotequatetherighthandwiththelefthandside.d.listsitemsintermsofmarketvalues,nothistoricalcosts.e.usesthemarketrateofreturn.Difficultylevel:EasyCAPITALSTRUCTUREDEFINITIONd8.Thefirm'scapitalstructurerefersto:a.thewayafirminvestsitsassets.b.theamountofcapitalinthefirm.c.theamountofdividendsafirmpays.d.themixofdebtandequityusedtofinancethefirm'sassets.e.howmuchcashthefirmholds.Difficultylevel:Easy15-3II.CONCEPTSMAXIMIZATIONOFFIRMVALUEb9.Ageneralruleformanagerstofollowistosetthefirm'scapitalstructuresuchthat:a.thefirm'svalueisminimized.b.thefirm'svalueismaximized.c.thefirm'sbondholdersaremadewelloff.d.thefirmssuppliersofrawmaterialsaresatisfied.e.thefirmsdividendpayoutismaximized.Difficultylevel:EasyTHELEVEREDFIRMb10.Aleveredfirmisacompanythathas:a.AccountsPayableastheonlyliabilityonthebalancesheet.b.hassomedebtinthecapitalstructure.c.hasallequityinthecapitalstructure.d.Alloftheabove.e.Noneoftheabove.Difficultylevel:EasyCAPITALSTRUCTUREANDTHEMANAGERa11.Amanagershouldattempttomaximizethevalueofthefirmby:a.changingthecapitalstructureifandonlyifthevalueofthefirmincreases.b.changingthecapitalstructureifandonlyifthevalueofthefirmincreasestothebenefitstoinsidemanagement.c.changingthecapitalstructureifandonlyifthevalueofthefirmincreasesonlytothebenefitsthedebtholders.d.changingthecapitalstructureifandonlyifthevalueofthefirmincreasesalthoughitdecreasesthestockholders'value.e.changingthecapitalstructureifandonlyifthevalueofthefirmincreasesandstockholderwealthisconstant.Difficultylevel:EasyEPS-EBIANALYSISd12.Theeffectoffinancialleveragedependsontheoperatingearningsofthecompany.Whichofthefollowingisnottrue?a.Belowtheindifferenceorbreak-evenpointinEBITthenon-leveredstructureissuperior.b.FinancialleverageincreasestheslopeoftheEPSline.c.Abovetheindifferenceorbreak-evenpointtheincreaseinEPSforallequityplansislessthandebt-equityplans.d.Abovetheindifferenceorbreak-evenpointtheincreaseinEPSforallequityplansisgreaterthandebt-equityplans.e.Therateofreturnonoperatingassetsisunaffectedbyleverage.Difficultylevel:Medium15-4MMPROPOSITIONIa13.TheModigliani-MillerPropositionIwithouttaxesstates:a.afirmcannotchangethetotalvalueofitsoutstandingsecuritiesbychangingitscapitalstructureproportions.b.whennewprojectsareaddedtothefirmthefirmvalueisthesumoftheoldvalueplusthenew.c.managerscanmakecorrectcorporatedecisionsthatwillsatisfyallshareholdersiftheyselectprojectsthatmaximizevalue.d.thedeterminationofvaluemustconsiderthetimingandriskofthecashflows.e.Noneoftheabove.Difficultylevel:MediumMMPROPOSITIONIe14.MMPropositionIwithouttaxesisusedtoillustrate:a.thevalueofanunleveredfirmequalsthatofaleveredfirm.b.thatonecapitalstructureisasgoodasanother.c.leveragedoesnotaffectthevalueofthefirm.d.capitalstructurechangeshavenoeffectstockholder'swelfare.e.Alloftheabove.Difficultylevel:MediumMMPROPOSITIONIc15.AkeyassumptionofMM'sPropositionIwithouttaxesis:a.thatfinancialleverageincreasesrisk.b.thatindividualscanborrowontheirownaccountatrateslessthanthefirm.c.thatindividualsmustbeabletoborrowontheirownaccountatratesequaltothefirm.d.managersareactin