Which of the Following Is the Best Example of an Equipment-Based

question 208

Multiple Choice

Which of the following is the best example of an equipment-based service?

• A) caterer
• B) doctors
• C) dry cleaners
• D) lawyers
• E) janitorial services

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Definitions:

Corporate Taxes

Taxes imposed on the income or profit of corporations by the government, affecting the company's net income and cash flow.

Miller Model

A theory that incorporates corporate taxes and bankruptcy costs to determine the optimal capital structure for a firm.

Trade-Off Theory

The addition of financial distress and agency costs to either the MM tax model or the Miller model. When trade-off is added to either model, the optimal capital structure can be visualized as a trade-off between the benefit of debt (the interest tax shield) and the costs of debt (financial distress and agency costs).

Debt Financing

A method of funding in which a company raises capital by borrowing money, agreeing to repay the principal amount along with interest on a specified schedule.