1.) Which of the following is not shown by research on capital structure decisions?

	a.	Firms place a lower value on bankruptcy costs than theory suggests they should.
	b.	Firms value financial flexibility.
	c.	Firms pay a large amount of attention to the debt levels of other firms in the industry.
	d.	Firms worry about the dilution of share value when new equity is issued.

2.) The cost of capital approach to estimating the optimal capital structure is considered unconstrained, which of the following may place a constraint on the analysis that prevents the firm from minimizing the cost of capital?

	a.	A decrease in the bond rating below investment grade at the optimal level.
	b.	An increase in the cost of preferred stock at the optimal level.
	c.	An increase in the cost of equity at the optimal level.
	d.	An increase in the cost of debt at the optimal level.

3.) Which of the following is not a factor that helps determine if the firm should increase the debt level to the optimal level quickly of slowly?

	a.	The need for financial flexibility.
	b.	The likelihood of a takeover.
	c.	The difference between the current level of debt and the optimal level of debt.
	d.	The degree of confidence in the estimate of the optimal level.