true or false: according to the Modligliani-Miller hypothesis, if a firm does an equity-for-debt swap, but does not change the operations of the firm, the sum total of the firms debt and equity will not change.
true or false: according to the Modligliani-Miller hypothesis, if a firm does an equity-for-debt swap, but does not change the operations of the firm, the sum total of the firms debt and equity will not change.
true or false: according to the modligliani-Miller hypothesis, if a firm does an equity-for-debt swap, but does not change the operations of the firm, the value of the firm's equity will not change.
true or false: according to the Modigliani- miller hypothesis, the value of the firm is determined by its operations, not by its financial structure
true or false: if the MM(modligliani-miller) hypotheisis holds, the risk of equity does not change as we increase the leverage of the firm.
true or false: If the modigliani miller hypothesis holds, the firms cost of capital depends on how close is to the firms optimal leverage.
According to the Modigliani and Miller hypothesis, the value of a firm: (Selct the best choice below.) A. is independent of the firm's capital structure. B. is maximized as the firm uses 99.9% of equity financing in its capital structure. C. decreases as the debt financing in the firm's capital structure increases. D. increases as the debt financing in the firm's capital structure increases.
true or false: according to the Modigliani-Miller, choosing the right structure can increase the value of the firm.
The Miller-Modigliani Arguments Firm U is all-equity financed, while Firm L is both debt- and equity-financed. The following table gives some relevant data on the two firms: (No Taxes) Firm U Firm L Annual expected future cash flow $5 M $5 M Cost of equity (rE) 15% 16% Market value of debt (D) 0 $15 M Cost of debt (rD) N/A 12% Market value of equity (E) ? ? Market value of the firm (V) ? ? Weighted average...
Modigliani and Miller Propositions: True or False and explain your answer; 1. MM's propositions assume perfect financial markets, with no distorting taxes or other imperfections. 2. MM's proposition 2 assumes that increased borrowing does not affect the interest rate on the firm's debt. 3. Borrowing does not increase financial risk and the cost of equity if there is no risk of bankruptcy. 4. Borrowing increases firm value if there is a clientele of investors with a reason to prefer debt.
1. True or false: According to the Gordon Growth Model, firms that pay dividends will always have a higher cost of equity than firms that do not pay dividends. 2. True or false: Flotation costs reduce the cost of capital. 3. True or false: If investors expect returns on the market to be higher next year, then, according to the CAPM, an individual firm’s cost of equity will be lower. 4. Which one of the following typically reduces the weighted...
ACE is an all equity firm that is contemplating changing their capital structure to 30% debt 70% equity. Their current financial scenario is below. What is their current EPS? ROA? ROE? Tax 40% Current Debt/equity 0% 100% Assets 30,000 EBIT 6,000 ROA Debt - Interest - Equity 30,000 EBT ROE Proposed Int Rate 0.06 Tax Shares Outs 1,200 EAT Share price 25 EPS Continuing with ACE, if they change to a 30-70 debt/equity capital structure their EPS will change to...