Flag question: Question 1

The interest tax shield is a key reason why:

Group of answer choices

the required rate of return on assets rises when debt is added to the capital structure.

the value of a levered firm is greater than the value of an unlevered firm.

the net cost of debt to a firm is generally less than the cost of equity.

firms prefer equity financing over debt financing.

--------------------------------------------------------------------------------------------------------------------------------------------------

Flag question: Question 2

The underlying assumption of the dividend growth model is that a stock is worth:

Group of answer choices

the same amount to every investor regardless of their desired rate of return.

the present value of the future income which the stock generates.

an amount computed as the next annual dividend divided by the market rate of return.

an amount computed as the next annual dividend divided by the required rate of return.