Which of the Following Statements Is CORRECT

question 19

Multiple Choice

Which of the following statements is CORRECT?

• A) WACC calculations should be based on the before-tax costs of all the individual capital components.
• B) Flotation costs associated with issuing new common stock normally reduce the WACC.
• C) If a company's tax rate increases, then, all else equal, its weighted average cost of capital will decline.
• D) An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.
• E) A change in a company's target capital structure cannot affect its WACC.

Recognize the role of excess reserves in the banking system and their impact on the money supply.

Identify strategies to prevent bank runs and maintain financial stability.

Assess the effects of specific policy actions by the Federal Reserve on the economy.

Identify the most common problems for which individuals seek psychotherapy.

---

Definitions:

Ethical Tolerances

The degree to which behavior deviating from ethical norms is accepted or allowed within a group, organization, or society.

Ethics Ombudsperson

An official given the responsibility of corporate conscience who hears and investigates ethical complaints and informs top management of potential ethical issues.

Corporate Conscience

A concept referring to a company's ethical compass and its commitment to doing what is right in terms of social responsibility, beyond mere compliance with laws.

Company's Code

A set of guidelines, ethics, or standards that a company follows to ensure legal compliance and maintain its corporate integrity.