Which One of the Following Statements Is Correct? Assume the Pretax

question 98

Multiple Choice

Which one of the following statements is correct? Assume the pretax cost of debt is less than the cost of equity.

• A)A firm may change its capital structure if the government changes its tax policies.
• B)A decrease in the dividend growth rate increases the cost of equity.
• C)A decrease in the systematic risk of a firm will increase the firm's cost of capital.
• D)A decrease in a firm's debt-equity ratio will decrease the firm's cost of capital.
• E)The cost of preferred stock decreases when the tax rate increases.

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Definitions:

Retention of Material

The ability to remember and recall information, skills, or knowledge over time after initial learning has taken place.

Hindsight Bias

The inclination to feel, after something has happened, that one would have foreseen or anticipated the result.

Humility

Humility is the quality of having a modest or low view of one's importance, often allowing individuals to be open, teachable, and appreciative of others.

Operational Definitions

Specific descriptions of concepts involving observable conditions and the procedures used to measure them, making research replicable.