1. Issuing stock and using the money to pay off debt is one way a firm A. restructures. C. prepares for bankruptcy. B. refinances. D. prepares for its IPO.

2. In Wall Street language, a company that focuses on only one line of business is called a(n) A. pure play. C. growth firm. B. unlevered company. D. internally financed firm.

3. The overall return that a company must earn on its existing assets to maintain the value of its stock and to satisfy its owners, creditors, and providers of capital is called the A. reorganization value. B. flotation cost. C. weighted average cost of capital. D. capital structure.

4. During most cases, when a company files for bankruptcy, A. the court assigns an unbiased individual to run the company in the interim. B. the judge prepares a reorganization plan the company must follow. C. payments to creditors and shareholders are suspended. D. the debtor in possession runs the business.

5. The return that equity investors require on their investment in a firm is called the A. cost of equity. B. weighted average cost of capital. C. capital structure weight. D. project cost of capital.

6. When a firm raises money by issuing new stocks or bonds, the costs associated with the new stock or bond issues are called the A. intrinsic value. C. strike costs. B. floor value. D. flotation costs.

7. The run establishing priority of claims during a liquidation is called the A. reorganization priority list. C. absolute priority rule. B. bankruptcy proceeding rule. D. prepack claims petition.

8. The separate cost of capital in each section of a corporation is called the A. floor value. C. capital appreciation. B. divisional cost of capital. D. option cost