Which of the Following Statements Is CORRECT

question 63

Multiple Choice

Which of the following statements is CORRECT?

• A)In general, a firm with low operating leverage also has a small proportion of its total costs in the form of fixed costs.
• B)There is no reason to think that changes in the personal tax rate would affect firms' capital structure decisions.
• C)A firm with high business risk is more likely to increase its use of financial leverage than a firm with low business risk, assuming all else equal.
• D)If a firm's after-tax cost of equity exceeds its after-tax cost of debt, it can always reduce its WACC by increasing its use of debt.
• E)Suppose a firm has less than its optimal amount of debt.Increasing its use of debt to the point where it is at its optimal capital structure will decrease the costs of both debt and equity financing.

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Definitions:

Organic Design

A type of organizational design that is flexible, adaptable, and characterized by less formal rules and procedures to encourage innovation and creativity.

Narrow Spans of Control

An organizational structure where managers supervise a small number of subordinates, allowing for closer supervision and communication.

Decentralised Authority

A system of governance in which decision-making powers are distributed away from a central authority to smaller, localized entities.

Divisional Structure

An organizational framework divided into semi-autonomous units or divisions based on product, service, market, or geography.