Which of the Following Statements Is CORRECT

question 66

Multiple Choice

Which of the following statements is CORRECT?

• A) The capital structure that minimizes a firm's weighted average cost of capital is also the capital structure that maximizes its stock price.
• B) The capital structure that minimizes the firm's weighted average cost of capital is also the capital structure that maximizes its earnings per share.
• C) If a firm finds that the cost of debt is less than the cost of equity, increasing its debt ratio must reduce its WACC.
• D) Other things held constant, if corporate tax rates declined, then the Modigliani-Miller tax-adjusted tradeoff theory would suggest that firms should increase their use of debt.
• E) A firm can use retained earnings without paying a flotation cost.Therefore, while the cost of retained earnings is not zero, its cost is generally lower than the after-tax cost of debt.

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Definitions:

Case Study

An in-depth examination of an individual or group to explore the causes of underlying principles or outcomes.

Survey

A research method used for collecting data from a predefined group of respondents to gain information and insights on various topics of interest.

Allegations of Sexual Harassment

Claims made against an individual or organization regarding unwelcome and inappropriate sexual advances or behaviors.

Naturalistic Observation

A research method in which subjects are observed in their natural environment without any manipulation by the researcher.