18, Financial distress costs:
a) May include impaired service to customers and suppliers and lost of trust
b) May include not being able to pay back loans on time.
c) Increase with leverage.
d) All of the above.
19. Financial distress costs:
a) May increase the firm’s weighted average cost of capital (Rwacc)
b) Tend to offset the advantages of debt finance.
c) Can lower the value of the firm.
d) All of the above.
20. In order to reduce the great leverage incentives in the tax law, Governments may:
a) Increase the tax rate.
b) Reduce the tax rate.
c) Increase tax reductions to debt financing.
d) Increase administrative cost on new equity issues.
21. Governments willing to reduce the great leverage incentives the companies face:
a) May introduce limitations to the maximum annual deductible interest payments.
b) May introduce tax advantages to retained earnings.
c) May eliminate tax deductions on interest payments.
d) All of the above. Get Finance homework help today
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