1|Page
BADM 710 Final Actual Exam Newest 2026 Complete
Questions And Correct Answers |Already Graded
A+||Newest Exam Version!!!
The unlevered cost of capital is:
A: the cost of capital for a firm with no equity in its capital
structure.
B: the cost of capital for a firm with no debt in its capital
structure.
C: the interest tax shield times pretax net income.
D: the cost of preferred stock for an all-equity firm.
E: equal to the profit margin for a firm with some debt in its
capital structure. - Answer-B: the cost of capital for a firm
with no debt in its capital structure.
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.
,2|Page
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.
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.
,3|Page
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.
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.
, 4|Page
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.
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.
BADM 710 Final Actual Exam Newest 2026 Complete
Questions And Correct Answers |Already Graded
A+||Newest Exam Version!!!
The unlevered cost of capital is:
A: the cost of capital for a firm with no equity in its capital
structure.
B: the cost of capital for a firm with no debt in its capital
structure.
C: the interest tax shield times pretax net income.
D: the cost of preferred stock for an all-equity firm.
E: equal to the profit margin for a firm with some debt in its
capital structure. - Answer-B: the cost of capital for a firm
with no debt in its capital structure.
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.
,2|Page
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.
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.
,3|Page
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.
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.
, 4|Page
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.
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.
