The firm would borrow all the money used to finance

This preview shows page 11 - 14 out of 14 pages.

The firm would borrow all the money used to finance the new project, andthe interest on this debt would be $1.5 million per yearQuestion 155 / 5 ptsWhich of the following should not influence a firm’s dividend policydecision?The firm’s ability to accelerate or delay investment projectsA strong preference by most shareholders for current cash income vs. capitalgainsConstraints imposed by the firm’s bond indentureCorrect!The fact that much of the firm’s equipment has been leased rather thanbought and ownedThe fact that Congress is considering changes in the tax law regarding thetaxation of dividends vs. capital gains
Question 165 / 5 ptsWhich of the following statements is correct?
Capital gains earned in a share repurchase are taxed less favorably thandividends; this explains why companies typically pay dividends and avoidshare repurchasesCorrect!Very often, a company’s stock price will rise when it announces that it plansto commence a share repurchase program. Such an announcement couldlead to a stock price decline, but this does not normally happenStock repurchases increase the number of outstanding sharesThe clientele effect is the best explanation for why companies tend to varytheir dividend payments from quarter to quarterQuestion 175 / 5 ptsTrenton Publishing follows a strict residual dividend policy. All else equal,which of the following factors would be most likely to lead to an increase inthe firm’s dividend per share?
Earnings are unchanged, but the firm issues new shares of common stockQuestion 185 / 5 ptsWhich of the following statements is correct?
Question 195 / 5 ptsAssume both corporate taxes and financial distress costs apply to a firm.Given this, the tradeoff theory of capital structure illustrates thatCorrect!A firm's value and its weighted average cost of capital are inversely relatedA firm's value and its tax rate are inversely related
The maximum value of a firm is obtained when a firm is financed solely withdebtThe value of a firm rises as the interest rate on debt risesThe value of a firm rises as both the interest rate on debt and the tax rateriseQuestion 205 / 5 ptsAn implicit cost of adding debt to the capital structure is that it
End of preview. Want to read all 14 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Spring
Professor
MACHUCA

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture