Publicity Efforts

question 301

Multiple Choice

Publicity efforts:

• A) Attempt to attract attention to the firm without having to pay media costs.
• B) Can be more effective than advertising if a firm has a really new message.
• C) Can be more useful than advertising in helping a customer solve a problem.
• D) All of these alternatives are true.

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Definitions:

Leverage

Use of borrowed capital for investment with the aim to multiply the potential returns, while also increasing the risk of loss.

Independence Hypothesis

In capital structure theory, the original restrictive model by Modigliani and Miller that shows stock price to be independent of capital structure.

Modigliani

Refers to Franco Modigliani, an economist known for his work on the Modigliani-Miller theorem, which addresses the valuation of stocks and corporate taxes.

Miller

Miller refers to the Miller Modigliani theorem or Miller's theory, which deals with the capital structure of a company and the relationship between the return required by investors and the company's equity and debt.