Determine whether it is common stock, preferred stock, or bonds that has the feature best related to the following considerations. a. Ownership and control of the firm b. Obligation to provide return c. Claims to assets in bankruptcy d. High cost of distribution e. Highest return f. Highest risk g. Tax-deductible payment h. Payment partially tax-exemptto corporate recipient

6

Indicate whether the following statements is true or false. Provide the relevant explanations.   In the presence of corporate taxes, a company would prefer to raise debt only when the benefits of the tax shield fully offset the cost of debt. (Explain your reasoning – in your explanation, provide a numerical example supporting your answer.)

The for an organization is the cost of financing its activities through debt or equity.

A company may choose to finance its operations or certain projectts by the means of either debt or equity. explain the diffetence between these two methods and give at least two examples of each.

When a corporation invests borrowed money in assets that generate profits greater than the after-tax cost of the debt, it increases the return on equity for common shareholders. creates financial leverage. has a mix of debt and equity in its capital structure. does all of these options.   If the effective rate of interest is greater than the contract rate, the bonds will sell at par. a premium. a discount. any of these choices, depending on other circumstances.

The primary objective of management accounting is O A. to provide management with information useful for planning and control of operations. O B. to provide banks and other creditors with information useful in making credit decisions. O. C. to provide the relevant taxation authorities with information about taxable income. O D. to provide shareholders and potential investors with useful information for decision making.

Which of the following will increase the WACC for a tax-paying company? Decrease the proportion of equity financing Decrease the proportion of debt financing Decrease the market value of the equity Increase the market value of the debt

As a micro-enterprise, which sets of financing are the most likely to be used? *A. Banks and venture capitalistsB. Tax holidays and leasesC. Retained earnings and convertible securitiesD. Public issuance of equity and debt

Identify the term being referred to: The concept that shareholders can take advantage of using debt to maximize shareholder’s wealth. *