Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
100%
TRUE OR FALSE
Answer as either true or false and provide a reason for why.
- When a company pays dividends, its share price falls.
- Modigliani and Miller proposition II (without taxes) implies that the weighed average cost of capital increases as more debt is issued, since debt make the firm more risky
- The empirical findings that more profitable firms have lower debt ratios is consistent with the trade-off theory regarding capital structure.
- The WACC formula assumes that the amount of debt issued remains constant.
- Other things being equal, buying a put option is the same as selling a call option
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