{"id":413,"date":"2023-03-28T15:34:47","date_gmt":"2023-03-28T15:34:47","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/?post_type=chapter&p=413"},"modified":"2023-04-03T00:13:51","modified_gmt":"2023-04-03T00:13:51","slug":"review-problems","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/chapter\/review-problems\/","title":{"raw":"Review Questions","rendered":"Review Questions"},"content":{"raw":"
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Chapter 6 Review Questions<\/h2>\r\n1<\/span>. <\/span>Why does a company\u2019s capital have a cost?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/section>
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\r\n\r\n \r\n\r\n2<\/span>. <\/span>Why is the rate that debt holders require to entice them to lend money to a company different from the company\u2019s effective cost of debt capital?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/section>
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\r\n\r\n \r\n\r\n3<\/span>. <\/span>Assume that the corporate tax rate is 21%. Congress is discussing increasing the corporate tax rate to 32%. How might this change the capital structures that companies choose?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
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\r\n\r\n \r\n\r\n4<\/span>. <\/span>Describe the order of claimants and how it impacts the returns that various providers of capital require to entice them to provide funding to a company.<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/section>
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\r\n\r\n \r\n\r\n5<\/span>. <\/span>Explain what is meant by\u00a0<\/span>trade-off theory.<\/i>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/section> \r\n\r\nAttribution:<\/strong>\r\n\r\nThis chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.","rendered":"
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Chapter 6 Review Questions<\/h2>\n

1<\/span>. <\/span>Why does a company\u2019s capital have a cost?<\/span><\/p>\n<\/div>\n<\/div>\n<\/section>\n

\n
\n
\n

 <\/p>\n

2<\/span>. <\/span>Why is the rate that debt holders require to entice them to lend money to a company different from the company\u2019s effective cost of debt capital?<\/span><\/p>\n<\/div>\n<\/div>\n<\/section>\n

\n
\n
\n

 <\/p>\n

3<\/span>. <\/span>Assume that the corporate tax rate is 21%. Congress is discussing increasing the corporate tax rate to 32%. How might this change the capital structures that companies choose?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

4<\/span>. <\/span>Describe the order of claimants and how it impacts the returns that various providers of capital require to entice them to provide funding to a company.<\/span><\/p>\n<\/div>\n<\/div>\n<\/section>\n

\n
\n
\n

 <\/p>\n

5<\/span>. <\/span>Explain what is meant by\u00a0<\/span>trade-off theory.<\/i><\/p>\n<\/div>\n<\/div>\n<\/section>\n

 <\/p>\n

Attribution:<\/strong><\/p>\n

This chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.<\/p>\n","protected":false},"author":101,"menu_order":16,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-413","chapter","type-chapter","status-publish","hentry"],"part":30,"_links":{"self":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/413","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/users\/101"}],"version-history":[{"count":4,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/413\/revisions"}],"predecessor-version":[{"id":1302,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/413\/revisions\/1302"}],"part":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/parts\/30"}],"metadata":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/413\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/media?parent=413"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapter-type?post=413"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/contributor?post=413"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/license?post=413"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}