Title ross12e_chapter17_tb_answerkey.docx ✅

1 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Corporate Finance, 12e (Ross) Chapter 17 Capital Structure: Limits to the Use of Debt 1) Which one of these lowers cash flows? A) Decreased use of leverage B) Decreased costs C) Increased sales due to an improved economy D) The associated costs of bankruptcy E) A decrease in the interest rate charged on debt Answer: D Difficulty: 1 Easy Section: 17.1 Costs of Financial Distress Topic: Financial distress Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) The explicit costs, such as the legal expenses, associated with corporate default are classified as: A) debt flotation costs. B) beta conversion costs. C) direct costs of financial distress. D) indirect bankruptcy costs. E) unlevered costs of capital. Answer: C Difficulty: 1 Easy Section: 17.2 Description of Financial Distress Costs Topic: Bankruptcy Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation