By Adding Leverage,the Returns of the Firm Are Split Between

question 57

Multiple Choice

By adding leverage,the returns of the firm are split between debt holders and equity holders,but equity-holder risk increases because:

• A)interest payments can be rolled over.
• B)dividends are paid first.
• C)debt and equity have equal priority.
• D)interest payments have first priority.
• E)interest payments are so high.

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Definitions:

Harold Ickes

An American administrator and politician, known for his service as the Secretary of the Interior under President Franklin D. Roosevelt and his work on the New Deal projects.

Public Works Administration

A New Deal agency that contracted with private construction companies to build roads, bridges, schools, hospitals, and other public facilities.

Tennessee Valley Authority

Administrative body created in 1933 to control flooding in the Tennessee River valley, provide work for the region’s unemployed, and produce inexpensive electric power for the region.

New Deal

A series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States during the 1930s to respond to the Great Depression.