All Else Constant, the Weighted Average Cost of Capital for a Risky

question 99

Multiple Choice

All else constant, the weighted average cost of capital for a risky, levered firm will decrease if:

• A)the firm's bonds start selling at a premium rather than at a discount.
• B)the market risk premium increases.
• C)the firm replaces some of its debt with preferred stock.
• D)corporate taxes are eliminated.
• E)the dividend yield on the common stock increases.

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Definitions:

Units of Output

A measurement of production, quantifying the total goods or services produced by a company or industry.

Productive

Having the ability or capacity to produce a significant amount or result, especially regarding economic goods or services.

Complementary Factors

Complementary factors in economics refer to goods or inputs that are used together in production or consumption, where an increase in demand for one leads to an increase in demand for the other.

White-collar Employment

Jobs that typically involve professional, managerial, or administrative work, often in an office setting, as opposed to blue-collar jobs that involve manual labor.