FM Last Quiz

Which one of the following statements related to the static theory of capital structure is correct?

A firm's value is maximized when a firm operates at its optimal debt level.

On which one of the following dates is the determination made as to which shareholders will receive a dividend payment?

Date of record

Which one of the following is the date on which the board of directors agrees to pay a dividend and passes a resolution to do so?

Declaration date

Paying interest reduces the taxes owed by a firm. Which one of the following terms applies to this relationship?

Interest tax shield

Which one of the following is a direct bankruptcy cost?

Legal and accounting fees related to a bankruptcy proceeding

Which one of the following states that a firm's cost of equity capital is a positive linear function of the firm's capital structure?

M&M Proposition II without taxes

This morning, Structural Steel purchased 3,500 of its outstanding shares in the open market. What type of transaction was this?

Stock repurchase

Which one of the following statements matches M&M Proposition I without taxes?

The value of a firm is independent of the firm's capital structure.

Which one of the following is minimized when the value of a firm is maximized?

WACC

A stock repurchase will:

decrease the PE ratio.