A firms business risk is affected by abusiness cycle

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South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
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Chapter 12 / Exercise 4
South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
Raabe/Young/Nellen/Hoffman
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33.A firm’s business risk is affected by:a.business cycleb.the firm’s operating leveragec.competitive pressuresd.all the above
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South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
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Chapter 12 / Exercise 4
South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
Raabe/Young/Nellen/Hoffman
Expert Verified
a34.If a firm has current earnings per share of $2 and a degree of combined leverage of 4, a 10% increase in sales would result in earnings per share of:
35.If a firm has current earnings per share of $2 and a degree of financial leverage of 4, a 10% increase in sales would result in earnings per share of:
36.If a firm has current earnings per share of $2 and a degree of operating leverageof 4, a 10% increase in sales would result in earnings per share of:
37.If a firm has current earnings before interest and taxes of $100,000 and interest expense of $10,000, its degree of financial leverage would be:a. 10b. 1.11c. .10d.cannot tell from this informationa
38.If firms select the proportion of debt in their capital structures in order to balance the benefits of tax-deducible interest payments with opportunity costs, this wouldsupport the notion of:
39.The cost of capital for retained earnings:
40.Using the constant dividend growth model, which of the following components not be considered?
41.If a firm has total long-term capital of $1,000,000, preferred stock of $500,000, preferred dividends of $10 and preferred stock price of $100, the weighted cost of capital for preferred is:a. 50%b. 10%c. 5%d.cannot tell from this informationc
42.The after-tax cost of debt for a firm in the 35% tax bracket with a before-tax cost of debt of 6% is:
43.Finance theory favors the use of ____________ value weights in the calculation of the weighted average cost of capital.
44.All of the following components are needed to calculate the internal growth rate except:

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