1. If a company uses more debt and less equity in its capital structure, then A. Expected returns to stockholders will increase and riskiness will increase B. Expected returns to stockholders will decrease and riskiness will increase C. Expected returns to stockholders will increase and riskiness will decrease D. Expected returns to stockholders will decrease and riskiness will decrease E. None of the above 2. Harkabeparolyn formerly had an all-equity capital structure. Now they have taken on $5 million in debt. Assume their corporate income tax rate is 35% and the personal tax rate on debt is 35%. The personal tax rate on stock is zero. What is Harkabeeparolyn's gain from leverage? A. $5 million B. 3.25 million C. 1.75 million D. Zero E. None of the above. 3. Why does the marginal benefit of debt fall as the amount of debt rises? A. The greater the debt, the greater the possibility the firm will run at a loss B. The greater the debt, the lower the possibility the firm will run at a loss C. The greater the debt, the lower the debt-to-equity ratio D. The greater the debt, the greater the equity E. None of the above 4. Which of the following are examples of direct bankruptcy costs? A. Fees paid to attorneys B. Fees paid to accountants C. Loss of customers and key suppliers D. Both A and B E. All of the above 5. How is a company's dividend yield computed? A. Quarterly dividends divided by current stock price B. Annual dividend divided by current stock price C. Current stock price divided by annual dividend D. Dividends paid divided by earnings E. Lady Gaga dividend? 6. If Mr X sells Chaulmougra stock to Mr. Y on the ex-dividend date, who gets the A. Mr. X. B. Mr. Y C. They divide it evenly D. The company gets to keep the dividend E. None of the above