Hi Sarah,

I need this assignment to be completed. For the multiple choice questions no explanation is required. For the theory question steps are required. You can always use excel and paste the tables or formula back into word file.

Homework Assignment- Chapter 6 True or False (0.05 each/ 0.2 total) 1. Debt financing results in lower after-tax earnings relative to equity financing. True False 2. The M&M irrelevance proposition assures financial managers that their choice between equity or debt financing will ultimately have no impact on firm value. True False 3. In some instances, additional debt financing can encourage managers to act more in the interests of owners. True False 4. If the maturity of a company's liabilities is less than that of its assets, the company incurs a refinancing risk. True False Multiple Choice Questions: (0.1 each/ 1.2 total) 5. Financial leverage: I. increases expected ROE but does not affect its variability. II. increases breakeven sales, like operating leverage, but increases the rate of earnings per share growth once breakeven is achieved. III. is a fundamental financial variable affecting sustainable growth. IV. increases expected return and risk to owners. A. I and II only B. I and III only C. II and IV only D. II, III, and IV only E. I, II, III, and IV F. None of the above. 6. The best financing choice is the one that: A. sets the debt-to-assets ratio equal to 1. B. trades off the tax disadvantage of debt against the signaling effects of equity. C. maximizes expected cash flows. D. ignores the false comfort of financial flexibility. E. results in the lowest possible financial distress costs. 7. Homemade leverage is: A. the incurrence of debt by a corporation in order to pay dividends to shareholders. B. the exclusive use of debt to fund a corporate expansion project. C. the borrowing or lending of money by individual shareholders as a means of adjusting their level of financial leverage. D. best defined as an increase in a firm's debtequity ratio. E. the term used to describe the capital structure of a levered firm. F. None of the above. 8. Which of the following is NOT a likely financing policy for a rapidly growing business? A. Adopt a modest dividend payout policy that enables the company to finance most of its growth externally. B. Borrow funds rather than limit growth, thereby limiting growth only as a last resort. C. Maintain a conservative leverage ratio to ensure continuous access to financial markets. D. If external financing is necessary, use debt to the point it does not affect financial flexibility. E. None of the above. 9. According to the pecking order theory proposed by Stewart Myers of MIT, which of the following are correct? I. For financing needs, firms prefer to first tap internal sources such as retained profits and excess cash. II. There is an inverse relationship between a firm's profit level and its debt level. III. Firms prefer to issue new equity rather than source external debt. IV. A firm's capital structure is dictated by its need for external financing. A. I and III only B. II and IV only C. I, III, and IV only D. I, II, and IV only E. I, II, III, and IV F. None of the above. 10. Which of the following is NOT an implication of the pecking order theory of capital structure? A. On average, a firm's stock price drops when it announces an equity issue. B. Firms may want to maintain a reserve of cash or unused borrowing capacity. C. More-profitable firms (all else equal) should have higher debt ratios. D. Firms may fail to undertake positive-NPV projects if they would have to be financed with a new issue of equity. 11.Salinas Corporation has net income of $15 million per year on net sales of $90 million per year. It currently has no long-term debt, but is considering a debt issue of $20 million. The interest rate on the debt would be 7%. Salinas Corp. currently faces an effective tax rate of 40%. What would be the annual interest tax shield to Salinas Corp. if it goes through with the debt issuance? A. $560,0 00 B. $1,400,0 00 C. $8,000,0 00 D. $20,000,0 00 12. According to the pecking order theory of capital structure, why do firms avoid issuing equity? A. Because fees associated with issuing new equity are so high B. Because they want to avoid dilution of earnings per share C. Because they don't want to commit to paying dividends on the new equity D. Because equity issuance signals that managers believe their stock is overvalued, which causes the price of the stock to fall 13. Under the simplifying assumptions of Modigliani and Miller, an increase in a firm's financial leverage will: A. increase the variability in earnings per share. B. reduce the operating risk of the firm. C. increase the value of the firm. D. decrease the value of the firm . 14 Under the simplifying assumptions of Modigliani and Miller, an . increase in a firm's financial leverage will: A. increase the variability in earnings per share. B. reduce the operating risk of the firm. C. increase the value of the firm. D. decrease the value of the firm. 15 Please refer to the financial information for Squamish Equipment . above. For next year, calculate Squamish's times-burden-covered ratio if Squamish sells 2 million new shares at $20 a share. A. 1.0 3 B. 1.3 8 C. 1.6 0 D. 1.8 9 E. 2.1 0 F. None of the above. 16 Please refer to the financial information for Squamish Equipment . above. For next year, calculate Squamish's earnings per share if Squamish sells 2 million new shares at $20 a share. A. 1.2 8 B. 1.3 9 C. 2.0 0 D. 2.2 2 E. 4.0 0 F. None of the above. Question 17: (0.1 each/ 0.4 total) Kahuku Corporation has 100 million shares outstanding trading at $20 per share. The company announces its intention to raise $150 million by selling new shares. a. What do market signaling studies suggest will happen to Kahuku's stock price on the announcement date? Why? b. How large a gain or loss in aggregate dollar terms do market signaling studies suggest existing Kahuku shareholders will experience on the announcement date? c. What percentage of the value of Kahuku's existing equity prior to the announcement is this expected gain or loss? d. At what price should Kahuku expect its existing shares to sell immediately after the announcement? Question 18 (0.1 each/ 0.2 total) Please refer to the financial information for Nile Holdings above. Nile must decide how to finance a $100 million investment. Assume Nile raises $100 million of new debt at the end of 2014, at an interest rate of 7%. a. Calculate the firm's pro forma 2015 times-interest-earned (TIE) ratio. b. Calculate the percentage EBIT can fall (below expected EBIT) before interest coverage dips below 1.0