1. Which of the below statements are false? The present value of the interest tax shield is the same regardless of whether a firm intends to borrow permanently or temporarily If the personal tax on debt is greater than the personal tax on equity, then the introduction of personal taxes the decreases the value of the interest tax shield created by debt. If the personal tax on debt and the personal tax on equity are equal, then the introduction of personal taxes is irrelevant. All of the above. None of the above.

Q ) If the corporate income tax rate were to increase, then the use of debt will become more desirable in terms of increasing ROE. (All else equal.) a - True  b - False

Which of the following is CORRECT? Select one: a. When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible by the paying corporation. b. When calculating the cost of preferred stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation. c. Because of tax effects, an increase in the risk-free rate will have a greater effect on the after-tax cost of common stock as measured by the CAPM. d. Higher flotation costs reduce investors' expected returns, and that leads to a reduction in a company's WACC. e. All of the above are correct. Which of the following is CORRECT? Select one: a. If the NPV of a project is negative, the IRR for the project must also be negative. b. A project's MIRR can never exceed its IRR. c. If a project with normal cash flows has an IRR less than WACC, the project must have a positive NPV. d. If Project 1's IRR exceeds Project 2's IRR, then 1 must…

Indicate whether the following statements is true or false. Provide the relevant explanations.   In the presence of corporate taxes, a company would prefer to raise debt only when the benefits of the tax shield fully offset the cost of debt. (Explain your reasoning – in your explanation, provide a numerical example supporting your answer.)

15. In comparison to the case when there is only corporate tax, the benefit of debt tends to when there are both corporate and personal taxes. A. remain the same B. be smaller D. be greater for risky firms but smaller for safe firms C. be greater

16. Despite the tax benefit of debt, a firm may refrain from using only debt financing, A. because a large amount of debt potentially creates significant bankruptcy costs B. because the firm only has modest operating incomes C. if stock investors do not face personal tax, but investors in firms' debt face a personal tax rate equal to the corporate tax rate. D. all of the above

Assume that the tax on dividends and the tax on capital gains is the same. All else equal, what would a prudent investor prefer?   A. More information is needed.   B. The prudent investor would prefer dividends—a dollar today is always worth more than a dollar to be received in the future.   C. The prudent investor would be indifferent between receiving dividends or capital gains.   D. The prudent investor would prefer capital gains—the capital gain tax liability can be deferred until gains are realized.

Of the following, the most likely effect of an increase in income tax rates would be to: A)  Decrease the savings rate B)  Decrease the supply of loanable funds C)  Increase interest rates  a. All statements are correct. b. Only one statement is correct. c. Only one statement is incorrect.

1.There are two significant benefits of obtaining a loan over investing capital:a. the money does not have to be repaid, and lenders usually take an active interest in their creditorsb. the investment does not have to be repaid, and no ownership of the company is surrenderedc. no ownership of the company is given up or surrendered, and interest payments are tax deductibled. banks are dependable providers of venture funding, and interest charges are tax deductible2.A _________ aims to improve a good or service's revenue by increasing marketing activities or increasing production ability and performance.a. product line extension strategyb. geographic expansion strategyc. market penetration strategyd. strategic alliance strategy3.Entrepreneurs should be aware of three issues about business growth. What are the issues?a. a business's valuation increases with its growth, a business can grow too fast, and business growth is a top priority of most entrepreneurial firmsb. not all businesses…

How does the WACC DCF methodology mechanically incorporate interest tax shields (select the best answer)? Group of answer choices By estimating free cash flows that incorporate the tax benefits of debt. By adding the tax benefits of interest payments to the value of the firm. By adding the PV of the interest tax shields to the value of the firm. By estimating a discount rate that incorporates the tax benefits of debt.