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Which of the following will increase the value of a levered firm according to M&M Proposition I, with taxes? I. decrease in the amount of the debt; II. increase in the value of the unlevered firm; III. decrease in the tax rate; IV. increase in the interest rate on the debt. Select one: a. II and IV only b. II and III only c. II, III, and IV only d. II only e. I and IV only

Western Shores is comparing two separate capital structures. The first structure consists of 260,000 shares of stock and no debt. The second structure consists of 210,000 shares of stock and $1.5 million of debt. What is the price per share of equity?

Select one:

a. $27

b. $33

c. $22

d. $18

e. $30

When is a firm insolvent from an accounting perspective?

Select one:

a. When the firm's revenues cease

b. When the firm's debt exceeds the value of the firm's equity

c. When the firm is unable to meet its financial obligations in a timely manner

d. When the firm has a negative net worth

e. When the market value of the firm's equity equals zero

Which one of the following statements concerning financial leverage is correct?

Select one:

a. Changes in the capital structure of a firm will generally change the firm's earnings per share.

b. The use of leverage will always increase a firm's earnings per share.

c. The benefits of leverage are unaffected by the amount of a firm's earnings.

d. The shareholders of a firm are exposed to less risk anytime a firm uses financial leverage.

e. Financial leverage is beneficial to a firm only when the firm has negative earnings.