ABC Corporation is considering changing its capital structure by replacing some of its equity with debt. Which of the following statements is true regarding the potential impact on the company's financial leverage?a.Increasing debt in the capital structure will increase financial leverage.b.Increasing debt in the capital structure will decrease financial leverage.c.Financial leverage is only affected by changes in the dividend policy.d.Changing the capital structure has no impact on financial leverage.

If a firm increases the proportion of debt in the capital structure:A.The cost of debt will increase but there will be no impact on the cost of equity.B.The cost of equity and the cost of debt will both increase, but its cost of capital will fall.C.The cost of equity will increase, but the impact on the firm’s cost of capital is unclear in the absence of specific information about financial distress costs and the firm’s tax position.D.The cost of equity will increase but the cost of debt will decrease.

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.

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

The statement "a combination of debt and equity to optimize their capital structure" reflects which concept of Financial Management?Cost of CapitalCapital StructuringFinancial LeverageTrading on Equity

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.