MC1 (5 points): According to the tradeoff theory of capital structure, we should see firms using more debt if:

Group of answer choices

New technology makes bankruptcy proceedings quicker and less expensive.

Their tax rate goes down

Their cash flows become more uncertain

More of their assets are held as cash

MC2 (5 points): According to the pecking order theory of capital structure, which one of these circumstances would make issuing equity more attractive?

Group of answer choices

Having cash flows that are easily valued using public information

Large cash holdings

Low cost of debt

Low tax rates

MC3 (5 points): Which of the following projects would the Modigliani-Miller model probably work best for?

Group of answer choices

IBM

A biotech startup that will either go bankrupt or make its founders billionaires

A pop up store selling hats and t shirts during a week long volleyball tournament

A stake in your family's restaurant\

MC4 (5 points): Firm A and Firm B both have $200 in assets. Firm A is all equity, Firm B is 50% debt. Both firms suffer a mishap that reduces their asset value to $50. You own all of the securities issued by these firms. Which one of these statements is true?

Group of answer choices

It depends on how efficient bankruptcy proceedings are.

Your holdings in FIrm A will keep more of their value

Your holdings in Firm B will keep more of their value

Your holdings in both firms will lose equal amounts of value.