All Else Constant, Which One of the Following Will Increase

question 222

Multiple Choice

All else constant, which one of the following will increase the capital structure weight of debt as used in the computation of a firm's weighted average cost of capital?

• A) An increase in the firm's tax rate.
• B) A decrease in the market value of the firm's debt.
• C) An increase in the number of preferred shares outstanding.
• D) A decrease in the number of common shares outstanding.
• E) An increase in the prepayment of a bond issue.

---

Definitions:

Consumer Spending

The total expenditures by households on goods and services, which is a primary component of aggregate demand in an economy.

Increase

A rise in quantity or quality in a given context, such as price, value, or productivity.

Price Elasticity

An index reflecting the degree to which the demand for a product varies with a shift in its cost.

Supply

represents the total amount of a product or service that is available for purchase at any given price in a market.