final mba 701 | Questions with 100% Verified Answers | Latest
Update 2026/2027
Question: Which one of the following is an argument in favor of a low
dividend policy?
Answer:
The tax on capital gains is deferred until the gain is realized
Question: reverse stock split
Answer:
reverse stock split consolidates the existing shares into higher-priced fewer, shares. While
share price increases proportionally, the total market value of company remains same.
Question: Liquidating Dividend
Answer:
is the Dividend which is paid to the shareholders while liquidation
Question: Stock Dividend
Answer:
the Stock Dividend is the payment in which dividends are paid in form of new shares.
Question: Extra dividend
Answer:
The extra dividend is the special payment which is different from regular payment and it is
generally larger then regular dividend.
Question: Normal Dividend
Answer:
The Normal dividend is paid to the shareholders periodically. It can be quarterly or
annually
Question: The date before which a new purchaser of stock is entitled to
receive a declared dividend, but on or after which she does
not receive the dividend, is called the _____ date.
Answer:
Ex-dividend date is the date before which the purchaser of the stock can receive the
dividend. If the new purchaser buys the stock after ex-dividend date, he /she may will not
entitle to receive the dividend. the declared dividend will be paid to the last holder of
the stock before this purchase.
, Question: One of the indirect costs of bankruptcy is the incentive for
managers to take large risks. When following this strategy:
Answer:
Stockholders expropriate value from bondholders by selecting high-risk projects.
Question: The free cash flow hypothesis states that:
Answer:
issuing debt requires payments to creditors thereby reducing the ability of managers to
waste resources.
Question: MM Proposition II is the proposition that
Answer:
A firm's cost of equity capital is a positive linear function of the firm's capital structure.
MM Proposition II indicates that as a firm increases its debt, the cost of equity will also
rise, reflecting the increased risk to equity holders of having more debt.
Question: the use of leverage
Answer:
Increases the equity beta but does not affect the asset beta.
When a firm uses leverage, the risk (or beta) for equity holders increases since they bear
the brunt of the debt risk, but the overall asset risk remains unchanged.
Question: The interest tax shield is a key reason why:
Answer:
the net cost of debt to a firm is generally less than the cost of equity.
Question: milking the property
Answer:
A firm with high financial distress paying additional dividends.
Question: MM Proposition I with no tax supports the argument that:
Answer:
it is completely irrelevant how a firm arranges its finances.
Question: assume lsus corporation is similar to its industry with one
exception, it has high fixed costs relative to all other firms in
that industry. Given this, you should expect LSUS
corporation:
Answer:
To have a lower beta than its industry
Update 2026/2027
Question: Which one of the following is an argument in favor of a low
dividend policy?
Answer:
The tax on capital gains is deferred until the gain is realized
Question: reverse stock split
Answer:
reverse stock split consolidates the existing shares into higher-priced fewer, shares. While
share price increases proportionally, the total market value of company remains same.
Question: Liquidating Dividend
Answer:
is the Dividend which is paid to the shareholders while liquidation
Question: Stock Dividend
Answer:
the Stock Dividend is the payment in which dividends are paid in form of new shares.
Question: Extra dividend
Answer:
The extra dividend is the special payment which is different from regular payment and it is
generally larger then regular dividend.
Question: Normal Dividend
Answer:
The Normal dividend is paid to the shareholders periodically. It can be quarterly or
annually
Question: The date before which a new purchaser of stock is entitled to
receive a declared dividend, but on or after which she does
not receive the dividend, is called the _____ date.
Answer:
Ex-dividend date is the date before which the purchaser of the stock can receive the
dividend. If the new purchaser buys the stock after ex-dividend date, he /she may will not
entitle to receive the dividend. the declared dividend will be paid to the last holder of
the stock before this purchase.
, Question: One of the indirect costs of bankruptcy is the incentive for
managers to take large risks. When following this strategy:
Answer:
Stockholders expropriate value from bondholders by selecting high-risk projects.
Question: The free cash flow hypothesis states that:
Answer:
issuing debt requires payments to creditors thereby reducing the ability of managers to
waste resources.
Question: MM Proposition II is the proposition that
Answer:
A firm's cost of equity capital is a positive linear function of the firm's capital structure.
MM Proposition II indicates that as a firm increases its debt, the cost of equity will also
rise, reflecting the increased risk to equity holders of having more debt.
Question: the use of leverage
Answer:
Increases the equity beta but does not affect the asset beta.
When a firm uses leverage, the risk (or beta) for equity holders increases since they bear
the brunt of the debt risk, but the overall asset risk remains unchanged.
Question: The interest tax shield is a key reason why:
Answer:
the net cost of debt to a firm is generally less than the cost of equity.
Question: milking the property
Answer:
A firm with high financial distress paying additional dividends.
Question: MM Proposition I with no tax supports the argument that:
Answer:
it is completely irrelevant how a firm arranges its finances.
Question: assume lsus corporation is similar to its industry with one
exception, it has high fixed costs relative to all other firms in
that industry. Given this, you should expect LSUS
corporation:
Answer:
To have a lower beta than its industry
