Whether the statements are true or false.

Question

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Answer 1

Question

Chapter 16, Problem 1QP

Summary Introduction

To discuss: Whether the statements are true or false.

Expert Solution & Answer

Explanation of Solution

The incorrect options are as follows:

As financial leverage upsurges, the anticipated rate of return on equity increases by sufficient to recompense for its advanced risk. The worth of the company and shareholders’ wealth are unpretentious.

Hence, option (b) is incorrect

The sensitivity of equity returns to commercial risk, and hence the cost of equity upsurges with leverage even deprived of an alteration in the risk of financial distress.

Hence, option (c) is incorrect

The correct option is as follows:

The company’s value is does not based on the fraction of debt versus equity financing.

Hence, Option a) is correct.

When the company pays no taxes the weighted average cost of capital not based on the ratio of debt.

Hence, Option d) is correct.

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Answer 2

Question

Chapter 16, Problem 1QP

Summary Introduction

To discuss: Whether the statements are true or false.

Expert Solution & Answer

Explanation of Solution

The incorrect options are as follows:

As financial leverage upsurges, the anticipated rate of return on equity increases by sufficient to recompense for its advanced risk. The worth of the company and shareholders’ wealth are unpretentious.

Hence, option (b) is incorrect

The sensitivity of equity returns to commercial risk, and hence the cost of equity upsurges with leverage even deprived of an alteration in the risk of financial distress.

Hence, option (c) is incorrect

The correct option is as follows:

The company’s value is does not based on the fraction of debt versus equity financing.

Hence, Option a) is correct.

When the company pays no taxes the weighted average cost of capital not based on the ratio of debt.

Hence, Option d) is correct.

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Answer 3

Question

Chapter 16, Problem 1QP

Summary Introduction

To discuss: Whether the statements are true or false.

Expert Solution & Answer

Explanation of Solution

The incorrect options are as follows:

As financial leverage upsurges, the anticipated rate of return on equity increases by sufficient to recompense for its advanced risk. The worth of the company and shareholders’ wealth are unpretentious.

Hence, option (b) is incorrect

The sensitivity of equity returns to commercial risk, and hence the cost of equity upsurges with leverage even deprived of an alteration in the risk of financial distress.

Hence, option (c) is incorrect

The correct option is as follows:

The company’s value is does not based on the fraction of debt versus equity financing.

Hence, Option a) is correct.

When the company pays no taxes the weighted average cost of capital not based on the ratio of debt.

Hence, Option d) is correct.

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Answer 4

Question

Chapter 16, Problem 1QP

Summary Introduction

To discuss: Whether the statements are true or false.

Expert Solution & Answer

Explanation of Solution

The incorrect options are as follows:

As financial leverage upsurges, the anticipated rate of return on equity increases by sufficient to recompense for its advanced risk. The worth of the company and shareholders’ wealth are unpretentious.

Hence, option (b) is incorrect

The sensitivity of equity returns to commercial risk, and hence the cost of equity upsurges with leverage even deprived of an alteration in the risk of financial distress.

Hence, option (c) is incorrect

The correct option is as follows:

The company’s value is does not based on the fraction of debt versus equity financing.

Hence, Option a) is correct.

When the company pays no taxes the weighted average cost of capital not based on the ratio of debt.

Hence, Option d) is correct.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 16, Problem 1QP

Summary Introduction

To discuss: Whether the statements are true or false.

Expert Solution & Answer

Explanation of Solution

The incorrect options are as follows:

As financial leverage upsurges, the anticipated rate of return on equity increases by sufficient to recompense for its advanced risk. The worth of the company and shareholders’ wealth are unpretentious.

Hence, option (b) is incorrect

The sensitivity of equity returns to commercial risk, and hence the cost of equity upsurges with leverage even deprived of an alteration in the risk of financial distress.

Hence, option (c) is incorrect

The correct option is as follows:

The company’s value is does not based on the fraction of debt versus equity financing.

Hence, Option a) is correct.

When the company pays no taxes the weighted average cost of capital not based on the ratio of debt.

Hence, Option d) is correct.

Answer 6

Chapter 16, Problem 1QP

Summary Introduction

To discuss: Whether the statements are true or false.

Expert Solution & Answer

Explanation of Solution

The incorrect options are as follows:

As financial leverage upsurges, the anticipated rate of return on equity increases by sufficient to recompense for its advanced risk. The worth of the company and shareholders’ wealth are unpretentious.

Hence, option (b) is incorrect

The sensitivity of equity returns to commercial risk, and hence the cost of equity upsurges with leverage even deprived of an alteration in the risk of financial distress.

Hence, option (c) is incorrect

The correct option is as follows:

The company’s value is does not based on the fraction of debt versus equity financing.

Hence, Option a) is correct.

When the company pays no taxes the weighted average cost of capital not based on the ratio of debt.

Hence, Option d) is correct.

Answer 7

Chapter 16, Problem 1QP

Summary Introduction

To discuss: Whether the statements are true or false.

Answer 8

Expert Solution & Answer

Explanation of Solution

The incorrect options are as follows:

As financial leverage upsurges, the anticipated rate of return on equity increases by sufficient to recompense for its advanced risk. The worth of the company and shareholders’ wealth are unpretentious.

Hence, option (b) is incorrect

The sensitivity of equity returns to commercial risk, and hence the cost of equity upsurges with leverage even deprived of an alteration in the risk of financial distress.

Hence, option (c) is incorrect

The correct option is as follows:

The company’s value is does not based on the fraction of debt versus equity financing.

Hence, Option a) is correct.

When the company pays no taxes the weighted average cost of capital not based on the ratio of debt.

Hence, Option d) is correct.