A limitation of the Degree of Financial Leverage formula is that we assume the cost of debt (interest) will remain constant as a firm borrows more and more. O True False UESTION 25 A company with predictable cash flows (a utility company) is better suited to use more debt in their capital structure than a company with fluctuating, unpredictable cash flows (an automobile company). True False UESTION 26 Depreciation is a OA. A. Non deductible cash expense OB. B. Deductible cash expense OC. Deductible non-cash expense O D. None of the above

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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### Question 24
A limitation of the Degree of Financial Leverage formula is that we assume the cost of debt (interest) will remain constant as a firm borrows more and more.

- ○ True
- ○ False

### Question 25
A company with predictable cash flows (a utility company) is better suited to use more debt in their capital structure than a company with fluctuating, unpredictable cash flows (an automobile company).

- ○ True
- ○ False

### Question 26
Depreciation is a:

- ○ A. Non deductible cash expense
- ○ B. Deductible cash expense
- ○ C. Deductible non-cash expense
- ○ D. None of the above
Transcribed Image Text:### Question 24 A limitation of the Degree of Financial Leverage formula is that we assume the cost of debt (interest) will remain constant as a firm borrows more and more. - ○ True - ○ False ### Question 25 A company with predictable cash flows (a utility company) is better suited to use more debt in their capital structure than a company with fluctuating, unpredictable cash flows (an automobile company). - ○ True - ○ False ### Question 26 Depreciation is a: - ○ A. Non deductible cash expense - ○ B. Deductible cash expense - ○ C. Deductible non-cash expense - ○ D. None of the above
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