Can you please assist by clearly answering the question. Please dont copy and paste answers that have been already posted. In each of the theories of capital structure the cost of equity rises as the amount of debt increases. So why don’t financial managers use as little debt as possible to keep the cost of equity down? After all, isn’t the goal of the firm to maximize share value and minimize shareholder costs?

Can you please assist by clearly answering the question. Please dont copy and paste answers that have been already posted. In each of the theories of capital structure the cost of equity rises as the amount of debt increases. So why don’t financial managers use as little debt as possible to keep the cost of equity down? After all, isn’t the goal of the firm to maximize share value and minimize shareholder costs?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 9QTD

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In each of the theories of capital structure, the cost of equity increases as the amount of debt increases. So why don't financial managers use as little debt as possible to keep the cost of equity down? After all, aren't financial managers supposed to maximize the value of a firm?
Is this statement true or false? Give a reason for your answer. "The bird-in-hand theory suggests that a company can reduce its cost of equity capital by reducing its dividend payout ratio."
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The cost of equity rises as the quantity of debt rises in each of the capital structure theories. So, why don't financial managers employ as little debt as feasible to keep equity costs low? After all, aren't finance managers expected to increase a company's value?
How many statements below are correct about the Modigliani-Miller theorem? i. The theorem is not an exact description of reality. ii. The theorem provides a benchmark to understand how the capital structure could affect WACC. iii. The theorem implies that firms have benefited from financing with debt due to a higher required rate of return on debt compared with equity. iv. The value of the firm is not affected by its capital structure under any assumptions.
Can you please assist me and not just copy and give me answers that have already been answered. a) In each of the theories of capital structure the cost of equity risesas the amount of debt increases. So why don’t financial managers useas little debt as possible to keep the cost of equity down? After all,isn’t the goal of the firm to maximize share value and minimizeshareholder costs?b) Country Markets has an unlevered cost of capital of 12 percent, a taxrate of 38 percent, and expected earnings before interest and taxesof $15,700. The company has $12,000 in bonds outstanding that have aISSUED BY THE CI, MGMT3048 ON JUNE 11, 2023 36 percent coupon and pay interest annually. The bonds are selling atpar value. What is the cost of equity?
Which of the following actions should a manager take to optimize the firm's value? * Changing the capital structure if and only if the firm's value rises. Changing the capital structure if and only if the firm's value rises to the advantage of inside management Changing the capital structure if and only if the firm's value increases solely to the benefit of debtholders. Changing the capital structure if and only if the firm's value increases, even if it lowers stockholders' value. Changing the capital structure if and only if the firm's value grows and stockholder equity remains stable.
Which of the following statements regarding EVA is NOT CORRECT? Group of answer choices: EVA assumes that equity capital is not free. A firm’s EVA will increase if it achieves the same operating income with less investor-supplied capital. As long as a firm's ROIC is positive, its EVA will be positive. If a firm reports positive net income, its EVA will also be positive. Actions that increase reported net income may not always increase EVA.
Is this statement true or false? Give a reason for your answer. " Relevant or not, frequent changes in dividend policy can harm a firm."
One position expressed in the financial literature is that firms set their dividends as aresidual after using income to support new investment.a. Explain what a residual dividend policy implies, illustrating your answer with a tableshowing how different investment opportunities can lead to different dividend payoutratios.b. Think back to Chapter 14 where we considered the relationship between capital structureand the cost of capital. If the WACC-versus-debt-ratio plot was shaped like a sharp V,would this have a different implication for the importance of setting dividends accordingto the residual policy than if the plot was shaped like a shallow bowl (a flattened U)?
Consider the following statements: The main lesson to be learned from the Modigliani and Miller theory of capital structure assuming perfect markets and no taxation is that: I. a firm cannot affect its value by changing its capital structure II. the value of the firm is determined by its total cash flows III. the weighted average cost of capital increases as financial leverage decreases IV. the weighted average cost of capital decreases as financial leverage decreases V. the weighted average cost of capital remains the same whatever the level of financial leverage. Which of the statements is true? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a I and V only b I, II and V only c II, III and IV only d None of the above e I and II only
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