Which of the following is a potential cost or benefit of positive leverage? A interest tax shield
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MN.1
Which of the following is a potential cost or benefit of positive leverage?
A interest tax shield
B mitigation of information asymmetry
C higher goal congruence
D direct and indirect costs of financial distress
E. All of the above
Step by step
Solved in 2 steps
- which one is correct answer please confirm? QUESTION 27 The use of increasing amounts of combined leverage ____ the risk of financial distress. a. increases b. has no effect on c. decreases d. creates diversity inD6) Explain the concept of financial leverage and distinguish between positive & negative financial leverage.1. Explain briefly on “Relevant Cost & Irrelevant Cost”.2. “What is Financial Leverage”? Explain with appropriate illustration.3. Explain the cocept of “Systematic & Non-Systematic Risk”.4. Why is preference capital considered as a hybrid source of financing?
- What is positive and negative financial leverage? How are returns or losses magnified as the degree of leverage increases? How does leverage on a before-tax basis differ from leverage on an after-tax basis?Capital gain yield (CGY) can be either positive or negative. Select one: True False_____isthe difference between the gross present value of the benefits of that action and the amount of investment to ac those benefits a.Net Present Value (NPV) b.Economic value added (EVA) c.Internal Rate of Retum (RR) d.Discounted Cash Flow
- Financial leverage indicates - O a. The tendency of sales to vary disproportionately with fixed cost. O b. The tendency of profit before tax (PBT) to vary disproportionately with operating profit (EBIT). OC. The tendency of profit before tax (PBT) to vary disproportionately with sales. Od. The tendency of profit after tax (PAT) to vary disproportionately with fixed cost.How is the compressed adjusted present value (APV) model different from the Modigliani and Miller models? (Hint: consider the tax shield's discount rate.) What about this model is "condensed"?)How can we check whether a firm is paying its creditors well in time?vi. Why do we add floatation costs in the calculations of individual components costs?vii. List and briefly explain the qualitative and quantitative factors considered for ratio analysis.
- Which of the following is true of risk-return trade off? A) Risk can be measured on the basis of variability of return. B) Risk and return are inversely proportional to each other. C) T-bills are more riskier than equity due to imbalances in government policies. D) Riskier investments tend to have lower returns.Which of the following statements is correct? Multiple Choice All of the statements are correct. The weighted average cost of capital is calculated on a before-tax basis. The weights of debt and equity should be based on the balance sheet because this is the most accurate assessment of the valuation. An increase in the market risk premium is likely to increase the weighted average cost of capital.is the difference between the gross present value of the benefits of that action and the amount of investment required to achieve those benefits Oa. Net Present Value (NPV) Ob. Economic value added (EVA) OC Internal Rate of Return (IRR) d. Discounted Cash Flow
