In terms of capital structure, an indirect financial distress cost is a:

Select one:

a. Cost associated with actual bankruptcy, e.g. legal and administrative expenses

b. Cost associated with provisional taxation

c. Cost associated with attempting to avoid bankruptcy, e.g. restructuring costs, redundancy costs

d. Cost associated with government consumption tax

What is leverage or gearing?

Select one:

a. The amount of equity funding used by a firm

b. The tax-rate paid by a firm

c. The amount of debt funding used by a firm

d. The net cash-flows of a firm

Which of the following is needed to determine a companys WACC?

Select one:

a. Cost of debt capital

b. Accounting rate of return

c. Internal rate of return

For debt items, if you are given annual rates of interest and also told that interest on these debt items is calculated more than once per year then as the before-tax cost of these debt items you must calculate which if the following:

Select one:

a. Weighted cost

b. CAPM required rate of return

c. Dividend yield

d. Effective cost

Which of the following would give an indication of the level of leverage of a firm?

Select one:

a. Tax ratio

b. Payout ratio

c. Accounting rate of return ratio

d. Debt/equity ratio

With perfect capital markets, the nature of the real assets of the firm is irrelevant in influencing the market value of the firm.

Select one:

True

False