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.

Determine the conditions necessary for employing linear regression analysis, including assumptions about the error term.

Understand how to interpret the coefficient of correlation in the context of explaining the variance in the dependent variable.

Recognize the implications of a high coefficient of determination in regression analysis.

Apprehend the process and criteria for deciding when to use linear models based on statistical evidence.

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Definitions:

Probability

A measure of the likelihood that an event will occur, expressed as a number between 0 (impossible) and 1 (certain).

Babies Born

Refers to the count or statistics related to the birth of infants within a specific time frame or area.

Independent Events

Two or more events where the occurrence of one does not affect the probability of the others.

Probability

The likelihood of an event happening, ranging from 0 (impossible event) to 1 (certain event).