Fundamentals of Financial Manageme...
Solutions
Fundamentals of Financial Manageme...
Which of the following would likely entourage, a firm to increase the debt in its capital structure?
- a. The corporate tax rate increases.
- b. The personal tax rate increases.
- c. Due to market changes, the firm's assets become less liquid.
- d. Changes in the bankruptcy code make bankruptcy less costly to the firm.
- e. The firm’s sales and earnings become more volatile.
a.
To identify: The situation which would encourage a firm to increase the debt in its capital structure.
Introduction:
Capital Structure:
Capital structure refers to the securities or debt included in the total capital of the firm. Adequate capital structure is required for the optimum utilization of funds.
- Increase in corporate income tax rate increases the company’s tax liability, which will encourage a firm to increase the deb...
b.
To identify: The situation which would encourage a firm to increase the debt in its capital structure.
c.
To identify: The situation which would encourage a firm to increase the debt in its capital structure.
d.
To identify: The situation which would encourage a firm to increase the debt in its capital structure.
e.
To identify: The situation which would encourage a firm to increase the debt in its capital structure.
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