Question

7. A type of financing that involves one corporation borrowing from another non-financial corporation is called:
a) commercial paper
b) preferred sharing
c) an operating lease
d) a short term line of credit

8. Past the point where the optimal capital structure exists, adding debt to the capital structure:
a)results in higher interest rates for the firm, and higher leverage. The higher leverage results in a riskier firm with a higher cost of equity.
b)Reduces the firms cost of equity
c)violates SEC regulations if the excess debt is considered permanent.
d)results in the excess debt's interest not being tax deductible