Which of the following is an implicit cost of increasing proportion of debt of a company?
A. PE ratio of the company would increase
B. Rate of return of the company would decrease
C. Tax shield would not be available on new debts
D. Equity shareholders would demand higher return
Answer: Option D
This Question Belongs to Commerce >> Business Finance
Related Questions on Business Finance
The appropriate ratio for indicating liquidity crisis is
A. Operating ratio
B. Sales turnover ratio
C. Current ratio
D. Acid test ratio
A. Net present value method
B. Internal rate of return method
C. Profitablity index method
D. None of the above
A. a-4, b-3, c-1, d-2
B. a-3, b-4, c-1, d-2
C. a-2, b-3, c-1, d-4
D. a-3, b-2, c-4, d-1
Which one of the following assumptions is not included in the James E. Walter Valuation model?
A. All financing by retained earnings only
B. No change in the key variables such as EPS and DPS
C. The firm has finite life
D. All earnings are either distributed as dividends or invested internally immediately
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