1. "For project evaluation purposes, interest expenses are included in the estimation of a project's operating cash flows because interest payments are cash outflows."
a. False
b. True
2. "Once at the optimal debt ratio, the company should constantly rebalance its debt and equity to maintain this ratio. If the current debt ratio is higher than the optimal one, issue new common stock and use the proceeds to retire some debt." True or false?
a. False
b. True
3. "For two firms identical in every respect except the operating leverage, in general, the firm with a higher operating leverage should have a lower debt ratio."
a. False
b. True
4. "A firm may be forced into bankruptcy if it fails to make the interest payment or principal payment; therefore, the objective of making financing decisions is to minimize the use of debt as much as possible."
a. False
b. True