1. Explain the difference between business risk and financial risk.
2. What other factors besides operating leverage can affect a firm's business risk?
3. Referring to Table 13.2, calculate the market value of firm L (without a corporate income tax) if the equity amount in its capital structure decreases to $5,000 and the debt amount increases to $5,000. At this capital structure, the cost of equity is 15 percent.
