Which of the following statements is CORRECT?     One of the ways in which firms can mitigate or reduce potential conflicts between bondholders and stockholders is by increasing the amount of debt in the capital structure.     The threat of takeover generally increases potential conflicts between stockholders and managers.     Managerial compensation plans cannot be used to reduce potential conflicts between stockholders and managers.     The threat of takeovers tends to reduce potential conflicts between stockholders and managers.     The creation of the Securities and Exchange Commission (SEC) eliminated conflicts between managers and stockholders.

2 D )When financial markets are semi-strong form efficient, then: Traders can earn exceptional profits using publicly available information. Stock analysts have a trading advantage because of their access to vast amounts of public information. Company insiders can profit based on the inside information. Individuals can identify mispriced stocks using publicly available information

Which of the following statements is CORRECT? * Assume a corporation has less debt than what is ideal. Increasing the use of debt to reach its optimum capital structure would lower the cost of both debt and equity financing. There is no reason to believe that changes in the personal tax rate will have an effect on firms' capital structure decisions. Assuming everything else is equal, a firm with high business risk is more likely to increase the use of financial leverage than a firm with low business risk. In general, a company with low operating leverage has a small percentage of its total costs in the form of fixed costs. If a company's after-tax cost of equity exceeds its after-tax cost of debt, it can still lower its WACC by using more debt.

It is generally argued that the takeover constraint : Deters management from engaging in opportunistic behavior. Deters management from considering acquiring other companies. Deters management from declaring dividends. Deters management from increasing a firm’s level of borrowing.

What types of firms would we expect to observe higher direct agency costs of equity, such as consuming excessive perquisites by management ?   Question 7 options:   a)  Firms with high free cash flows   b)  Firms with fewer growth opportunities   c)  Firms with weak governance structures   d)  All of the above options are correct   e)  None of the options are correct

Empirical evidence suggests that IPO issues are generally: priced efficiently by the market. overpriced by investor excitement concerning a new issue. underpriced resulting from SEC regulation. underpriced, in part, to facilitate the issue. overpriced resulting from SEC regulation.