Capital Structure and Leverage 11. Modigliani and Miller (MM) show that under a restrictive set of assumptions that a firmâ€™s value is unaffected by its capital structure. Which of the following are not assumptions used by MM? a. no brokerage costs, no taxes, and no bankruptcy costs b. investors borrow at the same rate as corporations c. all investors have the same information as investors about the firmâ€™s future investment opportunities d. EBIT is not affected by the use of debt e. all of the above assumptions are used by MM 12. Signaling theory suggests firms should in normal times maintain reserve borrowing capacity that can be used if an especially good investment opportunity comes along. a. True b. False 13. In general, an increase in the corporate tax rate would cause firms to use less debt in their capital structures. a. True b. False 14. According to the â€œtrade-off theory,â€ an increase in the costs of bankruptcy would lead firms to the amount of debt in their capital structures. a. reduce b. leave unchanged c. increase 15. The situation in which managers have different (presumably better) information about firmsâ€™ prospects than do investors is called: a. symmetric information. b. asymmetric information. c. signal information. d. reserve borrowing capacity. Business Assignment Help, Business Homework help, Business Study Help, Business Course Help
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique.
FALL 2018 HOMEWORK HELP| ASSIGNMENT HELP,…