Which of the Following Is Least Likely to Move a Firm's

question 70

Multiple Choice

Which of the following is least likely to move a firm's position to the right on the Security Market Line (SML) ?

• A) An increase in the firm's beta
• B) Adding more financial debt to the firm's balance sheet relative to equity
• C) Changing the business strategy to include new product lines with more volatile expected cash flows
• D) Investors perceive the stock as being more risky
• E) An increase in the risk-free required rate of return.

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Definitions:

Theories

Systematically organized knowledge applicable in a relatively wide variety of circumstances, especially a system of assumptions, accepted principles, and rules of procedure devised to analyze, predict, or otherwise explain the nature or behavior of a specific set of phenomena.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing to use resources in one way rather than another.

Sacrificed Action

An act of giving up something valued for the sake of something else regarded as more important or worthy.

Clean Environment

An environment free from pollutants and toxins, often associated with sustainable practices and policies.