Suppose the Debt Ratio (D/TA)is 50%,the Interest Rate on New

question 36

True/False

Suppose the debt ratio (D/TA)is 50%,the interest rate on new debt is 8%,the current cost of equity is 16%,and the tax rate is 40%.An increase in the debt ratio to 60% would decrease the weighted average cost of capital (WACC).

---

Definitions:

Dividend Revenue

Income received from investments in the form of dividends, representing a share of a company's profits distributed to its shareholders.

Voting Power

The rights of shareholders to vote on corporate matters, which can influence company management, strategic direction, and corporate policies.

Significant Influence

The power to participate in the financial and operating policy decisions of an investee but not control those policies.

Inventories

The complete list of items such as property, goods in stock, or the contents of a building, often held for sale in the regular course of a business.