Which Statement Is Correct, All Else Held Constant

question 66

Multiple Choice

Which statement is correct, all else held constant?

• A)Beta is used to compute the return on equity and the standard deviation is used to compute the return on preferred.
• B)A decrease in a firm's WACC will increase the attractiveness of the firm's investment options.
• C)The aftertax cost of debt increases when the market price of a bond increases.
• D)If you have both the dividend growth and the security market line's costs of equity, you should use the higher of the two estimates when computing WACC.
• E)WACC is applicable only to firms that issue both common and preferred stock.

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Definitions:

Outside Supplier

An external company or entity that provides goods or services to another company, typically part of the supply chain.

Financial Advantage

The benefit gained by using financial resources in a way that increases wealth or provides a better return on investment.

Special Order

An order for a product or service that is outside the company's normal production or service offerings, often requiring unique specifications.

Units

The basic measure of a product or commodity used in the manufacturing and inventory process.