1. In making Capital Structure decisions, the overall objective is to:
a) minimize the firm's WACC
b) improve cash flows as much as possible
c) maximize the tax deductions the firm receives for interest expense
d) minimize the total amount of dividends and interest the firm needs to pay
2. Which of the below statements is true?
a) Equity financing is permanent financing, while debt financing is temporary financing
b) Debt is normally a less expensive form of capital than equity
c) corporations cannot make dividend payments to both common and preferred shareholders during the same year
d) both interest expense and dividend payments are tax deductible for the firm making them
3. As a firm's debt increases, its _______________ also increases. This makes the firm more risky and tends to increase the firm's _____.
a) market value / expected return
b) expected return / expected dividend payout
c) leverage / beta
d) systematic risk / unsystematic risk