1.Which of the following statements is not true regarding optimal finance methods in different capital structure theories?

a. The traditional view suggests that there is not optimal level of capital structure

b. Modigliani- Miller theorem without taxes suggests that firm value is irrelevant to its capital structure

c. Pecking order theory suggest that firms prioritise their financing strategies based on the approach of least resistance

d. Modigliani- Miller theorem with taxes suggests that firms should fund as much debt as possible

2.Which of the following is true regarding firms' capital structure decisions?

a. The traditional view suggests that there is no optimal level of capital structure

b. as firms' level of debt increases to a certain point, investors perceive increases in the risk of financial distress and thus start to require a higher rate of return

c. the risk of financial distress is irrelevant to firms' values

d. firms may choose to undertake high levels of debt if they have insufficient collateral or low borrowing capacity

3.According to the pecking order theory, businesses place sources of finance in the following order of preference:

a. retained profit, debt, equity share issue

b. retained profit, equity share issue, debt

c. debt, retained profit, equity share issue

d. equity share issue, retained profit, debt

4.The Modigliani and Miller (1958) proposition 1 (without tax) view of capital structure argues that the value of a firm is determined by?

a. Risk and uncertainty

a. The financing decision

c. The tax decision

d. The tax decision