1.Regarding a companys capital structure, which of the following theories (I-III) imply capital structure is irrelevant in determining firm value:

I. Modigliani & Miller Case I (MMI)

II. Modigliani & Miller Case II (MMII)

III. Static Theory

a) I b) II c) III d) II,III e) None of the above

2.Regarding a companys capital structure, which of the following theories (I-III) imply the higher the firms debt level, the higher the risk of bankruptcy:

I. Modigliani & Miller Case I (MMI)

II. Modigliani & Miller Case II (MMII)

III. Static Theory

a) I b) II c) III d) II,III e) None of the above

3.Which of the following statements (I,II,III) is(are) TRUE:

I. If a company's TA=EOY SE, the company's WACC approaches the beta from the SML/CAPM

II. According to Static Theory, firm value is maximized when the slope of WACC vs. D/E is zero

III. According to Modigliani & Miller Case II (MMII), as D/E increases, WACC approaches zero

a) I b) II c) III d) II,III e) None of the above