Question: according to the pecking order theory, a firm's leverage ratio is determinded by: a.the profitability of the firm b.the firm's financing needs c. equating the

according to the pecking order theory, a firm's leverage ratio is determinded by:

a.the profitability of the firm

b.the firm's financing needs

c. equating the tax benefit of debt to the financial distress cost of the debt

a cash payment made by a firm to its owners when some of the firm's assets are sold off is called

a. share repurchase

b. special dividend

c. liquidating dividend

MM Proposition I with taxes states that:

a. firm value is maximized when the firm is all equity financed

b.increasing the debt equity ratio increases firm value

c. capital structure does not affect the firm value

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

8. According to the pecking order theory proposed by Stewart Myers of MIT, which of the following are correct? I. For financing needs, firms prefer to first tap internal sources, such as retained...

Q:

E. None of the above 17. According to the Pecking Order Theory, a firm needing outside financing should first finance using A. Initial Public Offering of stock B. Seasoned Equity Offering of stock C....

Q:

According to the pecking order theory a firm's leverage ratio is determined by: A the profitability of the firm B the market rate of interest C equating the tax benefit of debt to the financial...

Q:

14. How do firms know their optimal debt/equity ratio? A. The ratio where Weighted Average Cost of Capital is maximized B. The ratio where Weighted Average Cost of Capital is minimized C. Optimal...

Q:

Which of the following is correct? According to the pecking order theory, a firm prefers debt to equity for financing, because equity does not provide tax shields. According to the pecking order...

Q:

I have these questions solved but I only need an explanation for the answers can you write for me an explanation? thank you 15. Which of the following factors favor the issuance of equity in the...

Q:

Question 3 (20 marks) Edwards Corp. is unlevered and is valued at $640,000. The company is currently deciding whether including debt in its capital structure would increase its firm value. The...

Q:

according to the pecking order theory of firms, leverage ratio is determined by a . The probability of the firm. b . The market rate of interest c Equating the tax benefit of debt to the financial...

Q:

A firm operating in perfect capital markets has a capital structure consisting of 10% debt and 90% equity. The firm's managers decide to "lever up" their company by borrowing a great deal of money...

Q:

12. Which one of the following is incorrect about capital structure theories? A) Modigliani and Millers framework without taxes posits that 100% debt maximizes your firm value. B) Pecking order...

Q:

Use Newton's method with x(0) = 0 to compute x(2) for each of the following nonlinear systems. a. b. sin(4Ï x1 x2) 2x2 x1 = 0, c. x1(1 x1) + 4x2 = 12, (x1 2)2 + (2x2 3)2 = 25. d. 5x21 x22 = 0,...

Q:

Calculate the voltages Vo and Vab, the currents io and ix, the power of Psi in the Figure.3 via Ohm's Law, KVL, and KCL. The voltage sources of the circeuit are Vs1 = 250 Vol, Vs2 = 50 Volt. 70 170...

Q:

You are so thankful that your employer offers direct deposit for your paychecks. Every other Friday, your paycheck is deposited into your account, and it saves you from having to make a trip to the...

Q:

On 1 March 2007 DB Limited issued R560 000 15% debentures at R98. The debentures were to be redeemed at par in four equal annual payments starting 28 February 2010. Required: Journalise the above...