An ideal capital structure would involve no owner equity and 100 percent borrowing. Why is this capital structure not realistic?

Select an answer:

• Lenders will be wary of a company with a high amount of debt.

• When a company relies on borrowing, employees tend toward lower productivity.

• Owners will want a say in how the business is run.

• You will lose the tax benefit of paying dividends to owners.

How does "discounting" work in capital budgeting?

Select an answer:

• Increases in cash flows are discounted as only being seasonal.

• Future cash flows are discounted by realistic expectations.

• Present cash flows are discounted by the interest rate.

• Future cash flows are discounted by the interest rate.

Why should you utilize financial institutions to handle your investments?

Select an answer:

• You are able to outsource complicated tasks to an expert.

• You are able to outsource other complicated tasks so you can focus on risk.

• You are able to outsource your investments in return for regular updates.

• You are able to outsource complicated tasks in return for a guaranteed return.