21 A firm's assets have a value of $20 million, the present value of its tax shields are 4 million, the present value of its bankruptcy costs are $3 million, and the present value of its agency costs are 5 million Using the Trade off model, what is the value of this leveraged firm A $16 million B $32 million C $22 million D $8 million E None of the above 22 What is Asset Substitution A Investing in a current asset instead of a long term asset B Investing in a foreign country rather than in the USA C Investing in a risky asset rather than in a safe asset as promised D Investing in futures contracts rather than forward contracts E None of the above 23 What is the Signaling Theory A, Management will avoid using debt if they are confident about the company B Management will pay extra taxes to the IRS just to show their liquidity C Management will select its leverage level to show they are financially strong enough to handle high debt D Management will avoid the use of debt tax shields E None of the above 24 How do bankruptcy costs affect the capital structure decision A Induce firms to have lower leverage B Induce firms to have higher leverage C No effect on leverage D Induce firms to issue less preferred stock E None of the above 25 Qualkonk Corporation paid dividends of $2 per share and had earnings per share of $8 in 2016 It has debt tax shields of $5 per share What is Qualkonk's dividend payout ratio A 4 B 0 4 C 0 625 D 0 25 E None of the above 26 Megabub Corporation has 4 million shares outstanding and earned $48 million in 2016 It paid a total of $8 million in dividends during the year What is Megabub's dividend payout ratio Round your answer to the second decimal place A 0 17 B 0 50 C 2 00 D 0 08 E None of the above 27 Larchmount Manufacturing, Inc had a dividend payout ratio of 40 in 2014 It carned $20 million that year and had 5 million shares outstanding What is Larchmount's dividend payment per share for that year A 40 B $1 60 C $4 D $0 25 E None of the above 28 A firm has a stock price of $1 20 per share and 900,000 shares outstanding It decides to do a 1 for 9 reverse stock split After the reverse split, the market price goes to $11 per share How much have the stockholders gained or lost from the reverse split A Gained $1,100,000 B Gained $100,000 C Zero

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21  A firm's assets have a value of $20 million, the present value of its tax shields are 4 million, the present value of its bankruptcy costs are $3 million, and the present value of its agency costs are 5 million  Using the Trade off model, what is the value of this leveraged firm  A  $16 million B  $32 million C  $22 million D  $8 million E  None of the above 22  What is  Asset Substitution   A  Investing in a current asset instead of a long term asset B  Investing in a foreign country rather than in the USA C  Investing in a risky asset rather than in a safe asset as promised D  Investing in futures contracts rather than forward contracts E  None of the above 23  What is the  Signaling Theory   A, Management will avoid using debt if they are confident about the company B  Management will pay extra taxes to the IRS just to show their liquidity C  Management will select its leverage level to show they are financially strong enough to handle high debt D  Management will avoid the use of debt tax shields E  None of the above 24  How do bankruptcy costs affect the capital structure decision  A  Induce firms to have lower leverage B  Induce firms to have higher leverage C  No effect on leverage D  Induce firms to issue less preferred stock E  None of the above 25  Qualkonk Corporation paid dividends of $2 per share and had earnings per share of $8 in 2016  It has debt tax shields of $5 per share  What is Qualkonk's dividend payout ratio  A  4 B  0 4 C  0 625 D  0 25 E  None of the above 26  Megabub Corporation has 4 million shares outstanding and earned $48 million in 2016  It paid a total of $8 million in dividends during the year  What is Megabub's dividend payout ratio  Round your answer to the second decimal place A  0 17  B  0 50 C  2 00 D  0 08 E  None of the above  27  Larchmount Manufacturing, Inc  had a dividend payout ratio of 40  in 2014  It carned $20 million that year and had 5 million shares outstanding  What is Larchmount's dividend payment per share for that year  A  40  B  $1 60 C  $4 D  $0 25 E  None of the above  28  A firm has a stock price of $1 20 per share and 900,000 shares outstanding  It decides to do a 1 for 9 reverse stock split  After the reverse split, the market price goes to $11 per share  How much have the stockholders gained or lost from the reverse split  A  Gained $1,100,000 B  Gained $100,000 C  Zero

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21. A firm's assets have a value of $20 million, the present value of its tax shields are 4 million, the present value of its

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