If a Firm Has the Optimal Amount of Debt, Then

question 14

Multiple Choice

If a firm has the optimal amount of debt, then the:

• A)direct financial distress costs must equal the present value of the interest tax shield.
• B)value of the levered firm will exceed the value of the firm if it were unlevered.
• C)value of the firm is minimized.
• D)value of the firm is equal to V_L + T_C * D.
• E)debt-equity ratio is equal to 1.0.

Distinguish between valid, void, and voidable contracts.

Apply the doctrine of promissory estoppel in contractual disputes.

Recognize and differentiate between formal and informal contracts.

Comprehend the role and effect of acceptance, offer, and communication in contract formation.

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Definitions:

Picketing Actions

A form of labor protest in which striking workers stand outside their place of work, often holding signs, to express grievances and deter others from entering the premises.

Mediation

A conflict resolution process involving a neutral third-party who helps disputing parties find a mutually acceptable solution without making decisions for them.

Railway Labor Act

A U.S. federal law originally passed in 1926 that governs labor relations in the railway and airline industries.

Med-arb

A hybrid dispute resolution process combining mediation and arbitration where unresolved issues in the mediation phase are arbitrated.