Complete the following statements by either filling in the m…
Complete the following statements by either filling in the missing word or selecting the correct option from the two choices given in parentheses (X/X or X/X/X):The capital structure of a company refers to the proportion of _______ and _______ the company uses in financing its assets.When calculating the weights of a company’s capital structure, the book value/current market value should be used.Two methods for estimating a company’s cost of common stock capital are _______ and ________.Using the yield to maturity on the company’ existing bonds is the most reasonable way to calculate the ________ for that company.Net debt equals the _______ less the _______ and ___________ assets the company owns. The interest tax shield occurs because interest payments are a _______ expense.As a company increases the weight of debt in its capital structure, its possibility of financial distress increases/decreases/does not change.A company is said to be in financial distress if it has difficulty meeting its ___________.The _________is the return the company must offer to use the funds of investors.The trade-off theory suggests that there is an advantage and a disadvantage to increasing the weight of debt in the capital structure. Increasing the amount of debt used increases the interest tax shield, thereby increasing/decreasing the value of the firm. At the same time, increasing the amount of debt increases/decreases the risk of financial distress, which carries both direct and indirect costs.