FIN 325 ch15-ch17

M&M Proposition I with tax implies that the:

WACC decreases as D/E ratio increases

underwriters generally

accept the risk of selling new securities in exchange for the gross spread

Stock splits can be used to:

adjust the market price of a stock such that it falls within a preferred trading range.

The dividend market is in equilibrium when:

all clienteles are satisfied

The common stock of Battle Gaming has historically had a low dividend yield, and that circumstance is expected to continue. As a result, the majority of its shareholders are individuals who prefer capital gains over cash dividends for tax reasons. The fact that most of these shareholders have similar characteristics is referred to as the _____ effect.

clientele effect

The explicit costs, such as legal and administrative expenses, associated with corporate default are classified as _____ costs.

direct bankrupcy

Which one of the following statements is correct concerning the issuance of long-term debt?

direct placement debts tend to have more restrictive covenants than publically issued debt

According to the static theory of capital structure, the optimal capital structure for a company:

equates marginal tax savings from additional debt to the marginal increased bankruptcy costs of debt

M&M Proposition II with taxes:

has the same general implications as M&M Proposition II without taxes.

According to the pecking-order theory, firms prefer to use ________ before any other form of financing.

internal funds

A stock repurchase program:

is essentially the same as a cash dividend program provided there are no taxes or other costs

a ___________ does not require a registration statement to be made with the SECissue of less than $5 million

issue of less than $5 million

Which one of the following statements concerning dilution is correct?

market value dilution occurs when the npv of a project is negative

Financing of new, nonpublic companies is broadly referred to as ________ financing.

private equity

The 40-day period following an IPO during which the SEC places restrictions on the public communications of the issuer is known as the _____ period.

quiet

Plummer Manufacturing recently registered 220,000 shares of stock under SEC Rule 415. The company plans to sell 120,000 shares this year and the remaining 100,000 shares next year. What type of registration is this?

shelf registration

Which one of the following involves a payment in shares that increases the number of shares a shareholder owns but also decreases the value per share?

stock dividend

Which one of the following is a key goal of the aftermarket period?

supporting the market price for a new securities issue

Mascorro Insurance recently provided a loan of $12.5 million to Grisham Furnishings. The loan is for 20 years at 7.2 percent interest. This loan is best described as a:

term loan

Which one of the following statements is accurate?

the optimal capital structure maximizes shareholder value

Which one of the following favors a low dividend policy?

the tax on capital gains is deferred until the gain is realized

Poindexter is funded by a group of wealthy investors for the sole purpose of providing funding for individuals and small firms that are trying to convert their new ideas into viable products. What is this type of funding called?

venture capital

which one of the statements concerning venture capital financing is correct? venture capitalists should have key contacts and financial strength

venture capitalists should have key contacts and financial strength

The optimal capital structure:

will vary over time as taxes and market conditions change.