To Maximize the Benefits of Using Financial Leverage, a Firm

question 88

Multiple Choice

To maximize the benefits of using financial leverage, a firm should

• A) strive to minimize their cost of capital.
• B) avoid securing funds through long-term debt financing.
• C) limit their investments to projects with minimum risk levels.
• D) incorporate in states with relatively low tax rates.

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Definitions:

External Costs

Costs that are not borne by the producers or consumers directly involved in a transaction but are imposed on other parties or the environment.

True Cost

Encompasses all the economic, environmental, and social costs associated with the production and consumption of a good or service.

Resource

Raw materials, labor, capital, and other inputs used in the production of goods and services.

External Benefits

Benefits of a good or service that are not captured by the market price and are received by third parties.