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:

Oswald The Rabbit

An early animated cartoon character created by Walt Disney and Ub Iwerks, predating Mickey Mouse and known for its significance in animation history.

Greek Myth

A collection of stories belonging to the ancient Greeks concerning their gods and heroes, the nature of the world, and the origins and significance of their religious practices.

Daedalus

a skilled craftsman and artist in Greek mythology, known for creating the Labyrinth and the wings for his son Icarus.

Icarus

In Greek mythology, a young man who attempted to escape Crete by wings made of feathers and wax, but flew too close to the sun, causing his demise.