罗斯公司理财题库cha17.doc

Chapter 17 Capital Structure: Limits to the Use of Debt ? Multiple Choice Questions? 1.?The explicit costs, such as the legal expenses, associated with corporate default are classified as _____ costs.?A.?flotationB.?beta conversionC.?direct bankruptcyD.?indirect bankruptcyE.?unlevered ? 2.?The costs of avoiding a bankruptcy filing by a financially distressed firm are classified as _____ costs.?A.?flotationB.?direct bankruptcyC.?indirect bankruptcyD.?financial solvencyE.?capital structure ? 3.?The explicit and implicit costs associated with corporate default are referred to as the _____ costs of a firm.?A.?flotationB.?default betaC.?direct bankruptcyD.?indirect bankruptcyE.?financial distress ? 4.?Indirect costs of financial distress:?A.?effectively limit the amount of equity a firm issues.B.?serve as an incentive to increase the financial leverage of a firm.C.?include direct costs such as legal and accounting fees.D.?tend to increase as the debt-equity ratio decreases.E.?include the costs incurred by a firm as it tries to avoid seeking bankruptcy protection. ? 5.?The legal proceeding for liquidating or reorganizing a firm operating in default is called a:?A.?tender offer.B.?bankruptcy.C.?merger.D.?takeover.E.?proxy fight. ? 6.?The value of a firm is maximized when the:?A.?cost of equity is maximized.B.?tax rate is zero.C.?levered cost of capital is maximized.D.?weighted average cost of capital is minimized.E.?debt-equity ratio is minimized. ? 7.?The optimal capital structure has been achieved when the:?A.?debt-equity ratio is equal to 1.B.?weight of equity is equal to the weight of debt.C.?cost of equity is maximized given a pre-tax cost of debt.D.?debt-equity ratio is such that the cost of debt exceeds the cost of equity.E.?debt-equity ratio selected results in the lowest possible weighed average cost of capital. ? 8.?In a world with taxes and financial distress, when a firm is operating with the optimal capital structure:I.