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:

Natural Selection

The process by which organisms better adapted to their environment tend to survive and produce more offspring, driving evolution.

Fruit Flies

Small flies belonging to the family Drosophilidae, often used in genetic research due to their short life cycles and simple genetic makeup.

Generations

Groups of individuals, most often in a society, born and living about the same time, sharing similar cultural experiences or historical events.

Homo Sapiens

The scientific name for modern humans, the only extant species of the genus Homo.