1、CHAPTER 17Financial Leverage and Capital Structure PolicyI. DEFINITIONSHOMEMADE LEVERAGEa 1. The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called:a. homemade leverage.b. dividend recapture.c. the weighted average cost of capital
2、.d. private debt placement.e. personal offset.M minimizesb. minimizes; maximizesc. maximizes; minimizesd. maximizes; maximizese. equates; (leave blank)CHAPTER 17OPTIMAL CAPITAL STRUCTUREc 43. The optimal capital structure:a. will be the same for all firms in the same industry.b. will remain constant
3、 over time unless the firm does an acquisition.c. of a firm will vary over time as taxes and market conditions change.d. places more emphasis on the operations of a firm rather than the financing of a firm.e. is unaffected by changes in the financial markets.M&M THEORYb 44. The basic lesson of M&M T
4、heory is that the value of a firm is dependent upon the:a. capital structure of the firm.b. total cash flows of the firm.c. percentage of a firm to which the bondholders have a claim.d. tax claim placed on the firm by the government.e. size of the stockholders claims on the firm.OBSERVED CAPITAL STR
5、UCTURESb 45. Corporations in the U.S. tend to:a. minimize taxes.b. underutilize debt.c. rely less on equity financing than they should.d. have extremely high debt-equity ratios.e. rely more heavily on bonds than stocks as the major source of financing.OBSERVED CAPITAL STRUCTURESe 46. In general, the
6、 capital structures used by U.S. firms:a. tend to overweigh debt in relation to equity.b. are easily explained in terms of earnings volatility.c. are easily explained by analyzing the types of assets owned by the various firms.d. tend to be those which maximize the use of the firms available tax she
7、lters.e. vary significantly across industries.BANKRUPTCY PROCESSc 47. A firm is technically insolvent when:a. it has a negative net worth on its balance sheet.b. the value of the firms assets is less than the value of the firms liabilities.c. it is unable to meet its financial obligations.d. it files the legal forms petitioning for bankruptcy protection.e. the value of its stock declines by more than 50 percent.
