Refer to the Following Graph

question 30

Multiple Choice

Refer to the following graph. If the price is set at Pc:

• A) a nonprice rationing mechanism must determine which producers will be able to sell the product.
• B) a nonprice rationing mechanism must determine which buyers will be able to purchase the product.
• C) anyone willing and able to pay the asking price will be able to purchase the product.
• D) the demand curve will shift to the left to achieve a new equilibrium.

---

Definitions:

Debt-Equity Ratio

A measure of a company's financial leverage, calculated by dividing its total liabilities by stockholders' equity, indicating the proportion of debt used in financing its assets.

After-Tax Cost of Debt

The net cost to a company for borrowing funds, calculated by subtracting the tax benefits of interest expenses from the total interest paid.

Cost of Equity

The Cost of Equity is the return a company requires to decide if an investment meets capital return requirements and is often used in financial analysis and valuing companies.

Weighted Average Cost of Capital (WACC)

A computation of an enterprise's cost of capital, with each capital category assigned a proportional weight.