Str581 final exam

D. all of these 51) Which of the following statements is true?

A. The Principle of Capital Market Efficiency says to consider the possible ways to minimize the value lost to capital market imperfections, such as asymmetric taxes, asymmetric information, and transaction costs.

B. The Behavioral Principle suggests to look for opportunities to create value by issuing securities that are in short supply, perhaps resulting from changes in tax law.

C. The Signaling Principle says to consider any possible change in capital structure carefully, because financing transactions and capital structure changes convey information to outsiders and can be misunderstood.

D. all of these 52) A checking account is __________.

A. a place to “collect” money between inflows and outflows B. an account that acts like a reservoir C. useful because you can add money in any amount D. all of these 53) “Hard” capital rationing refers to the rationing __________.

A. imposed by external factors B. always imposed by debt holders C. imposed internally by the shareholders D. always imposed by competitors 54) An all-equity-financed firm would __________.

A. not pay any income taxes because interest would exactly offset its taxable income.

B. pay corporate income taxes if its taxable income is positive C. pay corporate income taxes because it would have interest expense.

D. not pay corporate income taxes because it would have no interest expense.