QUESTION BELOW

7. Which of the following does NOT exacerbate the cost of nancial distress? A. The rm sells durable products. B. The rm is a growing rm with lots of investment opportunities. C. The rm has lots of protable patents. D. The rm is small. E. The rm has lots of different creditors. 8. Which of the following can alleviate the debt overhang problem? A. Issue additional equity. B. Issue junior debt. C. Elicit payment from existing shareholders. D. Renegotiate with existing debt holders and try to convert debt to equity. E. None of the above. 9. Which of the following is true: A. Even with taxes, capital structure is irrelevant when the manager evaluates the NPV of a project. B. The capital structure of the comparable rm must be similar to the project if the manager wishes to apply WACC. C. The capital structure of the comparable rm must be similar to the project if the manager wishes to apply APV. D. WACC does not take into account of the tax shield generated by the project. E. WACC is higher than the TA in APV if tax is positive. 10. Which of the following is true? A. If stock A and B both have higher volatility than stock C and D, then the equalweighted portfolio of A and B must have higher volatility than the equal-weighted portfolio of C and D. B. One can eventually eliminate all the risks in a portfolio if there is a large enough set of assets to diversify with. C. If one can identify the stock with the highest expected return, then he / she should hold that stock instead of the tangent portfolio. D. The fact that two stocks have the same volatility but different expected returns is a manifestation of market inefciency. E. If stock A has higher volatility than stock B, then it's possible that A has lower expected return than B if the CAPM holds