Jessica invested in Quantro stock when the firm was unlevered. Since then, Quantro has changed its capital structure

Jessica invested in Quantro stock when the firm was unlevered. Since then, Quantro has changed its capital structure and now has a debt-equity ratio of 0.30. To unlever her position, Jessica needs to:    A.  borrow some money and purchase additional shares of Quantro stock. B.  maintain her current equity position as the debt of the firm did not affect her personally. C.  sell some shares of Quantro stock and hold the proceeds in cash. D.  sell some shares of Quantro stock and loan out the sale proceeds. E.  create a personal debt-equity ratio of 0.30. Refer to section 16.2

23.	Which one of the following makes the capital structure of a firm irrelevant?    A.  taxes B.  interest tax shield C.  100 percent dividend payout ratio D.  debt-equity ratio that is greater than 0 but less than 1 E.  homemade leverage Refer to section 16.2

24.

M & M Proposition I with no tax supports the argument that:    A.  business risk determines the return on assets. B.  the cost of equity rises as leverage rises. C.  the debt-equity ratio of a firm is completely irrelevant. D.  a firm should borrow money to the point where the tax benefit from debt is equal to the cost of the increased probability of financial distress. E.  homemade leverage is irrelevant. Refer to section 16.3

25.	The concept of homemade leverage is most associated with:    A.  M & M Proposition I with no tax. B.  M & M Proposition II with no tax. C.  M & M Proposition I with tax. D.  M & M Proposition II with tax. E.  static theory proposition. Refer to section 16.3

26.

Which of the following statements are correct in relation to M & M Proposition II with no taxes? I. The required return on assets is equal to the weighted average cost of capital. II. Financial risk is determined by the debt-equity ratio. III. Financial risk determines the return on assets. IV. The cost of equity declines when the amount of leverage used by a firm rises.    A.  I and III only B.  II and IV only C.  I and II only D.  III and IV only E.  I and IV only Refer to section 16.3