reliable paper writing on Finance Course Assignment Questions Unit 4

Question 1

The legal process by which theoretically the ownership of a firm is transferred from the equity holders to the debt holders when the firm defaults on its debt obligations is called:

		liquidation.
		dissolution.
		redemption.
		bankruptcy.

Question 2

A firm may adopt a practice of maintaining relatively constant dividends called:

		artificial dividend policy.
		synthetic dividend policy.
		dividend conservation.
		dividend smoothing.

Question 3

__________ is the phenomenon that occurs when a corporation issues new shares of stock while the firm’s earnings remain the same, so that earnings per share decrease.

		Leverage
		Recapitalization
		Dilution
		Conservation of value

Question 4

Firms with __________ can use high levels of leverage and still have a low probability of default.

		positive cash flow
		an unlimited line of credit
		stable, reliable cash flow
		no debt

Question 5

When a firm faces financial distress and chooses not to invest in new projects with positive NPV, there is __________ problem.

		a debt-overhang
		an agency
		a cash flow
		a leverage

Question 6

Probably the primary limitation on the benefit that firms can receive from having debt is:

		their ability to borrow money.
		that a firm must have taxable income to receive the tax benefit of debt.
		that many firms do not want to incur the risks that come with debt.
		their need to borrow money.

Question 7

Although bankruptcy should be a last resort for a firm experiencing financial trouble, bankruptcy can provide renewed access to financing through:

		issuance of new equity.
		repurchase of outstanding stock.
		debtor-in-possession financing.
		workouts.

Question 8

The total market value of a firm’s securities is equal to the market value of all of its assets, whether the firm is unlevered or levered. Whether or not this statement is true, it is a reflection of:

		Modigliani and Miller’s first proposition.
		capital structure theory.
		weighted average cost of capital.
		leverage.

Question 9

In a tax-optimal capital structure, the level of interest payments that is proper is determined by the:

		cash flow of the firm.
		unlevered cost of capital.
		firm’s need for cash.
		level of the firm’s EBIT.

Question 10

When a firm raises funds from outside sources, its choices are usually to raise those funds through:

		equity alone or debt alone.
		equity alone or through a combination of debt and equity.
		selling stock or borrowing money.
		equity or retained earnings.

 

Written Responses:

• There is a 200 word minimum response required.
• Credible reference materials, including your course textbook(s), may be used to complete the assessment.

 

Question 11

How does a firm’s payout policy affect the value of the firm?

Attach File

 

Question 12

Leverage increases the risk of the equity of a firm. What does that mean, and what does that mean for the value of the stock in a firm?

Attach File

Is this the question you were looking for? If so, place your order here to get started!