If a Firm Can Shift Its Capital Structure So as to Change

question 71

Multiple Choice

If a firm can shift its capital structure so as to change its weighted average cost of capital (WACC) , which of the following results would be preferred?

• A)The firm should try to decrease the WACC because such an action will increase the value of the firm.
• B)The firm should try to increase the WACC because such an action will increase the value of the firm.
• C)The firm should try to decrease the WACC because such an action will decrease the value of the firm.
• D)The firm should try to increase the WACC because such an action will decrease the value of the firm.
• E)The firm should not try to change the WACC because changing the WACC will not change the value of the firm.

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Definitions:

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The achievement of financial goals and wealth accumulation, often measured by GDP growth, personal income, and business profitability.

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