Which one of the following states that a firm's cost of equity capital is directly and proportionally related to the firm's capital structure?

1.

Homemade leverage is:    A.  the incurrence of debt by a corporation in order to pay dividends to shareholders. B.  the exclusive use of debt to fund a corporate expansion project. C.  the borrowing or lending of money by individual shareholders as a means of adjusting their level of financial leverage. D.  best defined as an increase in a firm's debt-equity ratio. E.  the term used to describe the capital structure of a levered firm. Refer to section 16.2

2.	Which one of the following states that the value of a firm is unrelated to the firm's capital structure?    A.  Capital Asset Pricing Model B.  M & M Proposition I C.  M & M Proposition II D.  Law of One Price E.  Efficient Markets Hypothesis Refer to section 16.3

3.

Which one of the following states that a firm's cost of equity capital is directly and proportionally related to the firm's capital structure?    A.  Capital Asset Pricing Model B.  M & M Proposition I C.  M & M Proposition II D.  Law of One Price E.  Efficient Markets Hypothesis Refer to section 16.3

4.	Which one of the following is the equity risk that is most related to the daily operations of a firm?    A.  market risk B.  systematic risk C.  extrinsic risk D.  business risk E.  financial risk Refer to section 16.3

5.	Which one of the following is the equity risk related to a firm's capital structure policy?    A.  market B.  systematic C.  extrinsic D.  business E.  financial Refer to section 16.3