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Under an MM perspective, if in addition to corporate taxes, the cost of financial distress is also considered, this is commonly referred to as which capital structure theory? a. The reserve borrowing capacity theory. b. The signaling theory. c. The trade-off theory. d. The pecking order theory. Question 9 For a given firm, if management decides to outsource production (a variable cost) by at the same Not yet time selling its production facility (a fixed cost), which below statement is correct? answered Marked out of 1.00 a. The break-even point will increase, likely resulting in additional operating risk for the firm. b. The break-even point will increase, likely resulting in additional financial risk for the firm. question c. The break-even point will decrease, likely resulting in less operating risk for the firm. d. The break-even point will decrease, likely resulting in less financial risk for the firm. Question 5 For a given firm, management can decide its capital structure (i.e. which mix of debt and equity Not yet is being used to finance the firm). By doing so, management determines the financial leverage of the firm. Which below statement is correct? Marked out of 1.00 a. Increasing the proportion of cheaper debt being used in the capital structure of a given firm will likely increase the expected return on equity, but also lead in a parallel manner to a decrease to the risk borne by equity. b. Increasing the proportion of cheaper debt being used in the capital structure of a given firm will likely decrease the expected return on equity, but also lead in a parallel manner to an increase to the risk borne by equity. c. Increasing the proportion of cheaper debt being used in the capital structure of a given firm will likely increase the expected return on equity, but also lead in a parallel manner to an increase to the risk borne by equity. d. Increasing the proportion of cheaper debt being used in the capital structure of a given firm will likely decrease the expected return on equity, but also lead in a parallel manner to a decrease to the risk borne by equity