1|Page
BADM 710 FINAL EXAM LATEST 2026-2027 ACTUAL EXAM WITH
COMPLETE QUESTIONS AND CORRECT DETAILED ANSWERS (100%
VERIFIED ANSWERS) |ALREADY GRADED A+| ||PROFESSOR
VERIFIED|| ||BRANDNEW!!!||
The firm's capital structure refers to the:
A: mix of current and fixed assets a firm holds.
B: amount of capital invested in the firm.
C: amount of dividends a firm pays.
D: mix of debt and equity used to finance the firm's assets.
E: amount of cash versus receivables the firm holds. - ANSWER-
D: mix of debt and equity used to finance the firm's assets.
A manager should attempt to maximize the value of the firm by
changing the capital structure if and only if the value of the firm
increases:
A: as a result of the change.
B: to the sole benefit of the managers.
C: to the sole benefit of the debtholders.
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D: while also decreasing shareholder value.
E: while holding stockholder value constant. - ANSWER-A: as a
result of the change.
MM Proposition I without taxes proposes that:
A: the value of an unlevered firm exceeds that of a levered firm.
B: there is one ideal capital structure for each firm.
C: leverage does not affect the value of the firm.
D: shareholder wealth is directly affected by the capital structure
selected.
E: the value of a levered firm exceeds that of an unlevered firm. -
ANSWER-C: leverage does not affect the value of the firm.
A key underlying assumption of MM Proposition I without taxes is
that:
A: financial leverage increases risk.
B: individuals can borrow at lower rates than corporations.
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C: individuals and corporations borrow at the same rate.
D: managers always act to maximize the value of the firm.
E: corporations are all-equity financed. - ANSWER-C: individuals
and corporations borrow at the same rate.
MM Proposition I with taxes supports the theory that:
A: there is a positive linear relationship between the amount of
debt in a levered firm and its value.
B: the value of a firm is inversely related to the amount of
leverage used by the firm.
C: the value of an unlevered firm is equal to the value of a levered
firm plus the value of the interest tax shield.
D: a firm's cost of capital is the same regardless of the mix of debt
and equity used by the firm.
E: a firm's weighted average cost of capital increases as the debt-
equity ratio of the firm rises. - ANSWER-A: there is a positive
linear relationship between the amount of debt in a levered firm
and its value.
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MM Proposition II with taxes:
A: has the same general implications as MM Proposition II without
taxes.
B: reveals how the interest tax shield relates to the value of a firm.
C: supports the argument that business risk is determined by the
capital structure employed by a firm.
D: supports the argument that the cost of equity decreases as the
debt-equity ratio increases.
E: reaches the final conclusion that the capital structure decision
is irrelevant to the value of a firm. - ANSWER-A: has the same
general implications as MM Proposition II without taxes.
A firm has a debt-equity ratio of .64, a pretax cost of debt of 8.5
percent, and a required return on assets of 12.6 percent. What is
the cost of equity if you ignore taxes?
A: 8.06%
B: 8.55%
C: 11.12%
BADM 710 FINAL EXAM LATEST 2026-2027 ACTUAL EXAM WITH
COMPLETE QUESTIONS AND CORRECT DETAILED ANSWERS (100%
VERIFIED ANSWERS) |ALREADY GRADED A+| ||PROFESSOR
VERIFIED|| ||BRANDNEW!!!||
The firm's capital structure refers to the:
A: mix of current and fixed assets a firm holds.
B: amount of capital invested in the firm.
C: amount of dividends a firm pays.
D: mix of debt and equity used to finance the firm's assets.
E: amount of cash versus receivables the firm holds. - ANSWER-
D: mix of debt and equity used to finance the firm's assets.
A manager should attempt to maximize the value of the firm by
changing the capital structure if and only if the value of the firm
increases:
A: as a result of the change.
B: to the sole benefit of the managers.
C: to the sole benefit of the debtholders.
,2|Page
D: while also decreasing shareholder value.
E: while holding stockholder value constant. - ANSWER-A: as a
result of the change.
MM Proposition I without taxes proposes that:
A: the value of an unlevered firm exceeds that of a levered firm.
B: there is one ideal capital structure for each firm.
C: leverage does not affect the value of the firm.
D: shareholder wealth is directly affected by the capital structure
selected.
E: the value of a levered firm exceeds that of an unlevered firm. -
ANSWER-C: leverage does not affect the value of the firm.
A key underlying assumption of MM Proposition I without taxes is
that:
A: financial leverage increases risk.
B: individuals can borrow at lower rates than corporations.
,3|Page
C: individuals and corporations borrow at the same rate.
D: managers always act to maximize the value of the firm.
E: corporations are all-equity financed. - ANSWER-C: individuals
and corporations borrow at the same rate.
MM Proposition I with taxes supports the theory that:
A: there is a positive linear relationship between the amount of
debt in a levered firm and its value.
B: the value of a firm is inversely related to the amount of
leverage used by the firm.
C: the value of an unlevered firm is equal to the value of a levered
firm plus the value of the interest tax shield.
D: a firm's cost of capital is the same regardless of the mix of debt
and equity used by the firm.
E: a firm's weighted average cost of capital increases as the debt-
equity ratio of the firm rises. - ANSWER-A: there is a positive
linear relationship between the amount of debt in a levered firm
and its value.
, 4|Page
MM Proposition II with taxes:
A: has the same general implications as MM Proposition II without
taxes.
B: reveals how the interest tax shield relates to the value of a firm.
C: supports the argument that business risk is determined by the
capital structure employed by a firm.
D: supports the argument that the cost of equity decreases as the
debt-equity ratio increases.
E: reaches the final conclusion that the capital structure decision
is irrelevant to the value of a firm. - ANSWER-A: has the same
general implications as MM Proposition II without taxes.
A firm has a debt-equity ratio of .64, a pretax cost of debt of 8.5
percent, and a required return on assets of 12.6 percent. What is
the cost of equity if you ignore taxes?
A: 8.06%
B: 8.55%
C: 11.12%
