1.Which of the following statement is TRUE.

Select one:

A.If a firm pays out a higher percentage of earnings, new equity capital will have to be raised with common stock, which will result in higher control and earnings for the existing owners.

B.Generally, if earnings remain constant, the repurchase of shares reduces the number of outstanding shares, raising the earnings per share and therefore the market price per share.

C.Purchasers of a stock selling ex-dividend receive the current dividend.

D.The payment of cash dividends to corporate stockholders is decided by the firm's chief financial officer.

8. As fixed costs increase, ___________ increases.

Select one:

A. leverage

B. degree of financial leverage

C. earnings per share

D. degree of operating leverage

9. A firm is considering three different financing alternatives, debt, preferred stock, and common equity. The firm has created an EBIT-EPS chart that shows several indifference points. What does each indifference point show the firm?

Select one:

A.The level of EBIT that generates identical EPS under two alternative financing plans.

B.It shows the level of EBIT and EPS at which DFL is identical under two alternative financing plans.

C.Total firm risk equals business risk times financial risk.

D.The level of sales that generates identical EBIT and EPS figures.

12.Under which of the following conditions would the usage of fixed costs in the operation of a business be most beneficial?

Select one:

A.When a business is expected to experience a period of declining sales.

B.When a business is expanding, and sales revenues are rising.

C.During an economic recession.

D.When interest rates are rising.