QUESTION BELOW

1. Suppose the market is in the form of semi-strong efficiency, which of the following is NOT true? A. The market is also weak-form efficient. B. Any public information is immediately incorporated into security prices. C. The market is also in the strong form of efficiency. D. One cannot generate positive NPV by trading in the financial market without private information. E. One cannot find arbitrage opportunities without private information. 2. Which of the following is true: A. The present value calculation only applies to safe cash flows but not risky cash flows. B. The present value of a stream of cash flows cannot be negative. C. For the same company, the present value of its stock must be higher than the present value of its debt. D. The present value calculation takes into account of both the time value of money and risk adjustment. E. The present value formula does not apply if expected cash flows are negative. 3. Which of the following is NOT true? A. If tax is the only friction, then all firms should take zero debt. B. If there are no frictions, MM suggests that the level of leverage does not affect firm value. C. If there are no frictions, MM suggests that the manager cannot create value by changing the capital structure of the firm. D. With both tax and cost of financial distress, optimal leverage can be different for different industries. E. According to the trade-off theory, if two firms face the same tax rate, then the difference in leverage can only be explained by the difference in expected distress cost