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Multiple choice questions- Q1) Molten Ltd. is considering a plan to invest more heavily in automated production machinery at its current location. To...
Multiple choice questions-
Q1) Molten Ltd. is considering a plan to invest more heavily in automated production
machinery at its current location. To do this, it will have to take on substantial debt. What is
the expected impact of this change in capital structure on Molten's degree of financial
leverage? Please choose the right option and explain.
a) No change
b) An increase
c) A decrease
d) Can't be determined
Q2) Which of the following statements best describes the meaning of the ex-dividend date for
a) It is the date that determines whether a buyer of a new share is entitled to the dividend.
b) It is the date on which the amount of dividends per share is announced.
c) It is the date of approval of a dividend by the company's board of directors.
d) It is the date of the day after the dividend is paid.
Q3) Which of the following statements about a firm's weighted average cost of capital (WACC)
a) The firm's WACC will never be affected by how the firm raises additional capital to
finance future capital investments.
b) The firm's WACC represents an opportunity cost for investors, so it must be calculated
using current market values.
c) The only reason for calculating a firm's WACC is to determine the opportunity cost to
investors so that they can decide whether to invest with the firm.
d) An increase in the proportion of debt in the capital structure will always lead to an
increase in the firm's WACC because of the increased financial risk.