Capital structure is irrelevant in terms of firm

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16. Capital structure is irrelevant in terms of firm value in a perfect capital market environment where there are . a. no taxes. b. transaction costs. c. bankruptcy costs. d. a & b d 17. There is an arbitrage argument for the irrelevance of capital structure based upon the possibility that shareholders can . a 18. Ways of reducing the agency costs of debt include . d 19. Which of the following statements is true? minimize the value lost to capital market imperfections, such as asymmetric taxes, asymmetric information, and transaction costs. by issuing securities that are in short supply, perhaps resulting from changes in tax law. tax benefits from capital structure choices. c 20. Which of the following statements is true? a. The Principle of Capital Market Efficiency says to consider the possible ways to minimize the value lost to capital market imperfections, such as asymmetric taxes, asymmetric information, and transaction costs. b. The Behavioral Principle suggests to look for opportunities to create value by issuing securities that are in short supply, perhaps resulting from changes in tax law. c. The Signaling Principle says to consider any possible change in capital structure carefully, because financing transactions and capital structure changes convey information to outsiders and can be misunderstood. d. all of these b 21. Which of the following statements is true? fair market security prices, which also change equity-debt risk bearing, are simply a risk-return trade-off. Such transactions don’t affect firm value (except for possible signaling effects).
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tax benefits from capital structure choices. issuing securities that are in short supply, perhaps resulting from changes in tax law. d
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