Which of the following would likely encourage a firm to increase the debt in its capital structure? a. The corporate tax rate increases. b. The personal tax rate increases. c. Due to market changes, the firm’s assets become less liquid. d. Changes in the bankruptcy code make bankruptcy less costly to the firm. e. The firm’s sales and earnings become more volatile.

Q: All of the following are likely to result in the use of less debt in a company's capital structure…

A: A company uses two main types of funding – debt and equity.   Debt refers borrowings and liabilities…

Q: Which of the following actions should Paperang Inc. take if it wants to reduce its cash conversion…

A: Cash conversion cycle is that the total period of time taken by the firm to finish its operating…

Q: Which of the following statements is FALSE? As debt increases, the risk associated with bankruptcy…

A: Source of raising capital include: Equity financing Debt financing Loans from financial…

Q: you

A: Financial hardships Financial hardship refers to a situation in which a company cannot make payments…

Q: Which of the following statements is CORRECT? The debt ratio that maximizes expected EPS generally…

A: Capital structure refers to the mix of a company's long-term financing sources, specifically the…

Q: Why do loss-making companies still pay a dividend? A) The tax benefits exceed the loss incurred in…

A: Dividend policy represents the decision-making of the management regarding the declaration or…

Q: Which of the following about optimal capital structure is incorrect?   Optimal capital structure is…

A: Company requires funding for their investment which can be obtained from broadly two sources.…

Q: According to pecking order theory, managers will often choose to fina O New equity rather than debt,…

A: The pecking order theory is a financial theory that describes how companies prioritize and choose…

Q: Which of the following statements is true? a. High liquidity means a company is short on cash and…

A: Debtholders are just like the creditors of the company and they will have prior claim on the assets…

Q: Why do companies often prefer debt financing to other forms of financing for capital investments? a.…

A: Debt and Equity are two important sources of finance being used in business. On debt, interest…

Q: Which of the following statements is most correct? Why?* choices: a. The expected return on…

A: Bonds are referred as the security type, where an issuer used to owe the debt holder and also are…

Q: Which one of the following is not an effect of an increase in leverage     Managers have fewer…

A: Increases in leverage means introducing more debt into capital structure.

Q: Taggart Technologies is considering issuing new common stock and using the proceeds to reduce its…

A: The objective of the question is to understand the financial implications of Taggart Technologies…

Q: Why do companies accelerate depreciation on their tax return but often use slower depreciation…

A: Companies generally use accelerated depreciation on their tax return, as these methods result in a…

Q: An analyst at a company notes that its cost of debt is far below that of equity. He concludes that…

A: The balance between equity and debt in a company's capital structure is a fundamental aspect of…

Q: Answer as either true or false and provide a reason for why.   When a company pays dividends, its…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Explain how capital adequacy requirements may affect a commercial bank’s dividend payout and growth…

A: Capital adequacy requirement refers to the amount of capital a bank must have as per the requirement…

Q: pany borrows, the higher will be its tax shields, therefore a company will always prefer to issue…

A: WACC is weighted average cost of capital after tax.

Q: For a bank with deficient capital ratios, which of the following actions could be required by…

A: This action would enhance liquidity but might not directly impact capital ratios, as cash is already…

Q: If we drop the assumption that there are no information and transaction costs, in addition to…

A: As per Modigliani and Miller model, capital structure is relevant in valuing a company when there is…

Q: What affect would an increase in the cost of bankruptcy have on the capital structure of a firm?…

A: Bankruptcy cost is associated with the cost of financing of debt. Higher bankruptcy cost indicates…

Q: Consider the following statements: The Trade-off theory of capital structure cannot explain the…

A: The Trade-off theory of capital structure cannot explain the following: I. Why profitable firms have…

Q: Which of the following is one of the causes of over capitalization? a. Reduction in the market…

A: Over Capitalization means when a company have huge amount of debt in its book and its Net assists…

Q: Which of the following is incorrect about the Pecking Order Theory? A.Firms with high ratios of…

A: Several statements have been provided related to the Pecking Order Theory. We have to find the one…

Q: Which of the following statement is correct?

A: Pecking Order Theory: As per this theory, the preference for sources for funds is first retained…

Q: Financial slack is the amount of unused access to debt markets or bank financing. Which theory of…

A: Without a doubt! The Pecking Order Theory, which was first developed by Myers and Majluf, two…

Q: Which of the following is not one of the things that manager can do to reduce the capital ratio…

A: Paying out higher dividends to stockholders.

Q: should companies retain these dividends in the firm to protect employment and investments?

A: Since there are 3 separate questions it is possible to solve the first question.

Q: A bank that seeks to increase its risk-adjusted capital ratio has a number of options at its…

A: Risk adjusted capital ratio It is total adjusted capital divided by risk weighted assets. It is used…

Q: As a firm takes on more debt, its probability of bankruptcy  ___  . Other factors held constant, a…

A: Levered Beta: Levered beta measures the volatility of a company's stock returns relative to the…

Q: 16. Despite the tax benefit of debt, a firm may refrain from using only debt financing, A. because a…

A: The correct answer to the question is option A. With increase in debt, the bankruptcy cost also…

Q: What is cost of financial distress to the firm without going bankrupt?Give two examples.

A: The financial distress costs are all such cost incurred by company due to the probability that it…

Q: Debt overhang occurs when: 1. A company is so indebted that it has little incentive to invest as…

A: Meaning of debt overhang: It is a situation in which a high amount of debt is there in the company…

Q: Which of the following is a disadvantage of long-term debt as a means of company financing? Group…

A: Funds are very important and necessary for smooth running of a business organization. A business has…

Q: A firm is in a world with (a) taxes, (b) costs of financial distress, (c) agency conflicts between…

A: The increase of financial leverage will be providing benefits of company in terms of taxes because…

Q: Suppose that a new government is elected and it changes the law applying to firms to: • Allow…

A: The trade-off theory of capital structure proposes that a corporation balances costs and advantages…

Q: theory. According to T&M Stalic there is no optimal capital structure. According to present value of…

A: According to Pecking order theory there is no optimal capital structure…

Q: Which of the following statements is CORRECT? * Assume a corporation has less debt than what is…

A: The capital structure is a technique in which the company has use the mix use of debt and equity to…

Q: Identify three financial signs that are considered red flags. Briefly describe in one sentence for…

A: A red flag is a warning or a threat that tells the company that there is a potential threat to the…

Q: Ross’s Lipstick Company’s long-term debt agreements make certain demands on the business. For…

A: Reclassifying of investment means changing the class of investments. The investment is changed from…