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:

Convenience Products

Goods or services that are easy to obtain and meet the immediate needs of consumers.

Capital Items

Long-term assets acquired or used by a business to generate income and not intended for resale in the normal course of operation.

Symbolic Attributes

Symbolic attributes refer to the intangible qualities that imbue products or brands with meaning beyond their functional use.

Service Attributes

The inherent characteristics and features of a service that contribute to its value and quality from the perspective of the customer or user.