According to Modigliani and Miller's Proposition II without taxes:
A. the capital structure decision has no effect on the cost of equity.
B. investment and the capital structure decisions are interdependent.
C. the cost of equity increases as the use of debt in the capital structure increases.
Answer: C. the cost of equity increases as the use of debt in the capital structure increases.
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Interest expenditures of a governmental fund should include
A. Interest paid during the year, only. B. Interest paid during the year plus any interest that matured but was not paid during the year. C. Interest paid during the year, any interest that matured but was not paid during the year and accrued interest on short-term debt recorded as a fund liability. D. Interest paid during the year, any interest that matured but was not paid during the year and accrued interest on all general long-term liabilities.
The December 31 . 2014, balance sheet of Giorgio Inc, reported total assets of $1,050,000 and total liabilities of $680,000 . The following information relates to the year 2015: • Madden Inc issued an additional 5,000 shares of common stock at $25 per share on July 1 . 2015. • Madden Inc paid dividends totaling $80,000. • Net income for 2015 was $110,000. • No other changes occurred in
stockholders' equity during 2015. The stockholders' equity section of the December 31 . 2015, balance sheet would report a balance of a. $400,000. b. $685,000. c. $525,000. d. $835,000.