A firm currently has no debt. What will happen to the firm's Beta and its cost of equity if the firm issues debt? A. The beta will increase and the cost of equity will rise. B. The beta will decrease and the cost of equity will fall. C. It depends on the relationship between personal tax rates and corporate tax rates. D. Nothing. The interest tax shield is a key reason why: A. the required rate of return on assets rises when debt is added to the capital structure. B. the value of an unlevered firm is equal to the value of a levered firm. C. firm value rises when leverage is increased. D. the cost of debt is equal to the cost of equity for a levered firm. E. firms prefer equity financing over debt financing. Which one of the following portfolios probably has the most systematic risk? A. a portfolio consisting of Treasury bonds B. an ETF that tracks the S&P500 C. a portfolio with a beta of 1.5 D. a portfolio comprised of 50 percent cash and 50 percent short-term bonds When making financial decisions related to assets, you should: A. always consider market values. B. place more emphasis on book values than on market values. C. rely primarily on the value of assets as shown on the balance sheet. D. place primary emphasis on historical costs. E. only consider market values if they are less than book values. The salvage value of an asset creates an after-tax cash inflow to the firm in an amount equal to the: A. sales price of the asset. B. sales price minus the book value. C. sales price minus the tax due based on the sales price minus the book value. D. sales price plus the tax due based on the sales price minus the book value. E. sales price plus the tax due based on the book value minus the sales price