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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

Which of the following would likely entourage, a firm to increase the debt in its capital structure?

  1. a. The corporate tax rate increases.
  2. b. The personal tax rate increases.
  3. c. Due to market changes, the firm's assets become less liquid.
  4. d. Changes in the bankruptcy code make bankruptcy less costly to the firm.
  5. e. The firm’s sales and earnings become more volatile.

a.

Summary Introduction

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.

Explanation
  • Increase in corporate income tax rate increases the company’s tax liability, which will encourage a firm to increase the deb...

b.

Summary Introduction

To identify: The situation which would encourage a firm to increase the debt in its capital structure.

c.

Summary Introduction

To identify: The situation which would encourage a firm to increase the debt in its capital structure.

d.

Summary Introduction

To identify: The situation which would encourage a firm to increase the debt in its capital structure.

e.

Summary Introduction

To identify: The situation which would encourage a firm to increase the debt in its capital structure.

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