Which of the Following Statements Is CORRECT

question 11

Multiple Choice

Which of the following statements is CORRECT?

• A)The capital structure that maximizes the stock price is also the capital structure that minimizes the weighted average cost of capital (WACC).
• B)The capital structure that maximizes the stock price is also the capital structure that maximizes earnings per share.
• C)The capital structure that maximizes the stock price is also the capital structure that maximizes the firm's times interest earned (TIE) ratio.
• D)Increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing; however, this still may raise the company's WACC.
• E)If Congress were to pass legislation that increases the personal tax rate but decreases the corporate tax rate, this would encourage companies to increase their debt ratios.

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Definitions:

General Environment

The broad external conditions (economic, technological, sociocultural, and political/legal) that affect organizations and their functioning.

Specific Environment

The external factors and influences that are directly relevant and impactful to an organization's operations, including competitors, customers, and suppliers.

Dynamic Force

Represents the energy or motivation that drives change and movement within various contexts, often related to organizations or personal development.

General Environment

The overall conditions and factors external to a business that affect its strategy and performance, such as economic, social, and political conditions.