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NEW QUESTION: 1
Assuming zero taxes, the effect of increasing leverage in the capital structure of a firm is to:
A. Increase the value of the business as debt is cheaper than equity
B. Maintain the value of the business unaltered
C. either increase, decrease or leave constant the value of the business depending upon other factors
D. Decrease the value of the business as debt is riskier than equity
Answer: B
Explanation:
Explanation
The value of a business derives itself from the value of its cash flows, and not its capital structure. However, the availability of tax deductions on debt allow increasing the value of the business to equity holders by using the tax shield.
In the absence of taxes, there is no such advantage. Even if debt is nominally priced lower than the cost of equity, substituting debt for equity makes the remaining equity more risky and increasing the cost of equity to offset any advantage gained from the lower cost of debt. Changing the capital structure does not change the value of the firm, and this in essence is the conclusion of the Modigliani-Miller theorem.

NEW QUESTION: 2
Which three of the following are components of a security rule? (Choose three.)
A. Trigger
B. User or host profile
C. Security String
D. Methods
E. Action
Answer: B,C,D

NEW QUESTION: 3
AS100 and AS200 each have two peering points in different parts of their network. AS100 would like to use one of the links and keep the other link as backup. What should be changed for the design inside AS100 for prefixes received from AS200?
A. AS-PATH
B. MED
C. local preference
D. weight
Answer: C