Which one of the following statements is TRUE?
A. A corporate golf club membership is an example of a nonpecuniary benefit
B. Firms borrowing money have greater flexibility to use that money when there are debt covenants.
C. When lenders protect themselves from the risk of asset switching by raising the interest rate, the firm's WACC can decrease.
D. A lender calling in a corporate loan and then lending the funds out to a safer borrower is an example of asset switching.
E. A supplier substituting a lower-quality raw material without approval is an example of asset switching.
Answer: A
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A) cost focus B) labor focus C) revenue focus D) environmental focus E) education focus
A solar easement is an example of an affirmative easement
Indicate whether the statement is true or false
Which of the following statements is FALSE?
A) When a firm borrows money to repurchase shares that account for a significant percentage of its outstanding shares, the transaction is called a leveraged recapitalization. B) MM Proposition I applies to capital structure decisions made at any time during the life of a firm. C) By choosing positive-NPV projects that are worth more than their initial investment, a firm can enhance its value. D) The choice of capital structure does not change the value of a firm if the cost of equity is higher than the cost of debt.
A(n) ________ is a pro rata cash settlement of creditor claims.
A) composition B) creditor control agreement C) extension D) liquidation