Which of the Following Is Least Likely to Lead to a Break

question 26

Multiple Choice

Which of the following is least likely to lead to a break point in the marginal cost of capital schedule?

• A)an increase in the required return demanded by investors for a new bond issue.
• B)increased flotation costs associated with seasoned equity offerings.
• C)decreased liquidity in money markets leading to lower selling prices for commercial paper.
• D)using retained earnings to fund new projects for the firm.
• E)issuing preferred stock to institutional investors.

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Definitions:

Total Revenue

The total income received by a firm from selling its goods or services, calculated as the unit price times the quantity sold.

Elastic Demand

A situation where the demand for a product changes significantly in response to changes in its price.

Midpoint Method

A technique used in economics to calculate elasticity by averaging the percentages of change in both quantity and price.

Price Elasticity

A gauge for assessing how the demand or supply levels of an item react to price alterations.