Which of the following statements about capital structure are correct? Select ALL correct answers.A company should always finance its business using as much debt as possible in order to optimize the capital structure.Having too little debt may increase the risk of default in repayment.A company needs to consider the current economic climate when making decisions on debt and equity proportions.Having too much equity may dilute earnings and the value of the original investors.

Which of these statements is true regarding corporate capital structures?Multiple choice question.The capital structure that maximizes the value of the firm provides the most benefit for its stockholders.The optimal capital structure results in a lower stock price and a higher cost of capital.The best capital structure is always the all-equity option.

The manager of a firm should change the capital structure if and only if Blank______.Multiple choice question.it benefits managementthe value of the debt exceeds the value of the equitythe change will increase the value of the firmthe change will decrease the value of the firm

Which of the following statements is NOT TRUE?Debt is costlier than equity.For the same business the firm can choose between the use of debt capital versus equity capital.Net profit can be substantially higher if debt is usedAll of the above

Which of the following statements is correct regarding capital structure theories? Select one:a.Capital Structure is the mix or proportion of a firm’s permanent long-term financing represented by debt and preferred stock onlyb.Modigliani and Miller approach states that the financing decision of a firm affects the market value of a firm in a perfect capital market.c.Traditional approach is known as the intermediate approach synonymous d.The capital structure decision is irrelevant to the valuation of the firm in the net income approach

4Which of the following statements regarding capital structure is(are) correct?Choose all correct answer(s).Other things equal (i.e. identical leverage and identical asset value), an iron ore company's financial distress cost is likely to be higher than a gold mining company because iron ore company's beta is likely to be higher than that of the gold mining company.Airlines have very high leverage because they have very stable cash flows and low probability of financial distressCompanies' actual leverage ratios often deviate from their optimal ratios but over the long-run they tend to adjust the leverage ratios toward their optimal levels.Assume that United States adopted a dividend imputation system, the tax benefit of debt financing would increase on average.