Which of the following statements about capital structure and leverage is most accurate？
A. Financial leverage is directly related to operating leverage.
B. Increasing the corporate tax rate will not affect capital structure decisions.
C. A firm with low operating leverage has a small proportion of its total costs in fixed costs.
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Which of the following is a key determinant of operating leverage？
A. Level and cost of debt.
B. The competitive nature of the business.
C. The trade-off between fixed and variable costs.
Which of the following statements about the payback period method is least accurate？ The payback period:
A. Provides a rough measure of a projects liquidity.
B. Considers all cash flows throughout the entire life of a project.
C. Is the number of years it takes to recover the original cost of the investment.
A share repurchase that begins with a company communicating to shareholders a specific number of shares and a range of acceptable prices is most likely to be a（n）:
A. Open market repurchase.
B. Fixed price tender offer.
C. Dutch auction.
A companys operations analyst is evaluating a plant expansion project that is likely to be financed in part by issuing new common equity. Flotation costs are expected to be 4% of the amount of new equ
A. Ignore them,because flotation costs for common equity are likely to be nonmaterial.
B. Estimate the cost of equity capital based on a share price 4% less than the current price.
C. Determine the flotation cost attributable to this project and treat it as part of the projects initial cash outflow.
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