Which of the Following Statements Is Correct

question 105

Multiple Choice

Which of the following statements is correct?

• A) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the number of shares outstanding.
• B) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the amortization.
• C) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the volatility of those cash flows.
• D) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the tax liability.

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Definitions:

T-statistic

A statistical measure used to determine the significance of the difference between two sample means compared through their standard error.

F-statistic

A value calculated in statistical analysis to assess the significance of group differences in a data set.

Alternative Hypothesis

A statement in statistics that is tested against the null hypothesis, suggesting that there is a significant difference or effect.

Population Means

The average of a set of characteristics, quantities, or values for an entire population.