Which of the Following Statements Is CORRECT

question 70

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 cost of equity from retained earnings (rs).
• 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) If a company increases its debt ratio, this will typically increase the marginal costs of both debt and equity, but it still may reduce 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:

Agonist

An agonist is a chemical or drug that binds to receptors in the brain and activates them, often mimicking the action of naturally occurring substances.

GABA

Gamma-Aminobutyric Acid, a chief inhibitory neurotransmitter in the mammalian central nervous system, playing a key role in reducing neuronal excitability.

Anxiety Reduction

The process of lessening or alleviating feelings of anxiety, stress, or worry, which can be achieved through various therapeutic techniques, relaxation methods, or medications.

Antagonist

In physiology and pharmacology, a substance that inhibits or counteracts the action of a neurotransmitter or hormone; in literature, a character or force opposing the protagonist.