1.

An increase in the corporate tax rate would likely encourage a corporation to increase the proportion of
debt in its capital structure.

TRUE

2. As a general rule, the capital structure that minimizes the required rate on equity also maximizes the
stock price.

FALSE

3. A decrease in a firm’s willingness to pay dividends is likely to result from an increase in its Stock price.

FALSE

4. A reduction in the corporate tax rate is likely to increase the debt ratio of the average corporation.

FALSE

5. An increase in the company’s degree of operating leverage would likely encourage a corporation to
increase the proportion of debt in its capital structure.

FALSE

6. A decrease in the firm’s business risk would increase the likelihood that a company would increase its
debt ratio in its capital structure

TRUE

7. A decrease in the company’s degree of operating leverage would likely to encourage a company to use
more debt in its capital structure.

TRUE

8. A stock split will cause a change in the total dollar amounts shown in Cash.

FALSE

9. A decrease in the debt ratio will generally have no effect on Financial risk.

FALSE

10. An increase in the personal tax rate is likely to increase the debt ratio of the average corporation.

FALSE