Test bank International Finance MCQ (word)Chap 14.docVIP

Fundamentals of Multinational Finance, 3e (Moffett) Chapter 14  Financial Structure and International Debt 14.1  Multiple Choice and True/False Questions 1)  Which financial economists are most closely associated with the financial theory of optimal capital structure? A)  Modogliani and Miller B)  Fama, Fisher, Jensen, and Roll C)  Black and Scholes D)  Markowitz and Sharpe Answer:  A Topic:  Optimal Capital Structure Skill:  Recognition 2)  Financial theory has at last provided us with a single optimal capital structure for domestic firms. Answer:  FALSE Topic:  Optimal Capital Structure Theory Skill:  Conceptual 3)  Financial practice suggests that there is a range for an optimal capital structure for a firm within an industry rather than a specific optimal ratio of debt to equity. Answer:  TRUE Topic:  Optimal Capital Structure Skill:  Conceptual 4)  For most firms, the cost of capital decreases to a low point as the firm ________ debt financing. At some point beyond this optimal level, the cost of capital increases as the amount of debt ________. A)  decreases; increases B)  decreases; decreases C)  increases; increases D)  increases; decreases Answer:  C Topic:  Cost of Capital Skill:  Conceptual 5)  One of the most important factors in making debt less expensive than equity is A)  the tax deductibility of depreciation. B)  the tax deductibility of equity. C)  the tax deductibility of dividends. D)  the tax deductibility of interest. Answer:  D Topic:  Cost of Debt Skill:  Recognition 6)  One of the most important factors in making debt less expensive than equity is A)  the seniority of equity obligations to debt claims. B)  the tax deductibility of dividends. C)  the tax deductibility of equity. D)  the seniority of debt obligations to equity claims. Answer:  D Topic:  Cost of Debt Skill:  Recognition 7)  Which of the following is NOT a factor offsettin