1. If debt financing is used, which of the following is conrece? A. The percentage change in net operating income is grewiter than a siven persentaye chaire in net inome C. The degeree of operating leverage is greater the dest 1 . D. Tbe percentage change in nert operating income is equal to a given perceentage chatge in net income, 2. For conventional cash flows project, if die calculnted NPV is nezative, then which of the fallowing mist be trive? The discomant rate used is A. Equal to the jinternal rate of retum. B. Too high, C.Greater than the internal rate of return. D.Too low. A. The NPV following statements is correct? A. The NPV method assumes that cash flows will be reinvessed at the required rate of return while the TRR method assumes reinvestmest at the risknfree rate. B. The NPV method assumes that cash flows will be reinvested at the required nate of return while the irete method assumes reinvestment at the IRR. C.The IRR method does not consider all relevant cash flows, and particularly cesh thows beyoted the poybeck. period. D. The NPV method does not eonsider the inflation premium. E. The NPV method assumes that cash flows will be rainvested at the risk-free mate white the velk tuethod assumes reinvestment at the IRR. 4. The target capifal structure of a firm is the capital structure that A. minimizes the default risk of long-term debt. B.maximizes the tax shield ereated by detal. C.minimizes the operating risk of the firm's assets. D.maximizes the price of the firm's stock. 5. In the real world, we find that dividends A. Are usually set as a fixed percentage of earnings. B. Tend to be a lower percentage of earmings for mature firms. C.Are uswally changed every year to refleet earnings changes. D. Ustally exhibit greater stability than earnings. E. Fluctuate more widely than earnings. 6. The combination of debt and equity that maximizes a firm's value is known as the A.maximum WACC. B.maximum business risk. C.degree of finameial leverage (DFL). D.optimal capital structure. Which of the following is not considered a capital component for the purpose of caleulating the weighte age cost of capital as it applies to capital budgeting? 1.Short-ferm debt. B. Preferred stock. C.Long-term debt. D.Corvmon stock. else equal, a "normal" stock split inereases the number of shares of stock outstanding. loes not recd to be recognized in any way on the balance sheet of a corporation. crease the dividend per share. fuces the number of shares of stock outstanding. erally results in a significant increase in the per share price of the stock from what it was