Which One of the Following Will Affect the Capital Structure

question 17

Multiple Choice

Which one of the following will affect the capital structure weights used to compute a firm's weighted average cost of capital?

• A)Decrease in the book value of a firm's equity
• B)Decrease in a firm's tax rate
• C)Increase in the market value of the firm's common stock
• D)Increase in the market risk premium
• E)Increase in the firm's beta

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Definitions:

Foot-In-The-Door Effect

An increase in compliance likelihood for a large request if a smaller request is agreed to first, reinforcing the concept of gradual commitment.

Social Facilitation Hypothesis

A theory suggesting that the presence of others can improve one's performance on tasks, especially those that are simple or well-learned.

Door-In-The-Face Effect

A compliance technique where a larger, unreasonable request is made first, followed by a smaller, more reasonable request that is the actual goal.

Conformity Hypothesis

A theory suggesting that individuals adjust their attitudes, beliefs, or behaviors to align with the norms of a group, often in response to real or imagined group pressure.