Which of the Following Statements Is CORRECT

question 93

Multiple Choice

Which of the following statements is CORRECT?

• A) The capital structure that maximizes the stock price is also the capital structure that maximizes earnings per share.
• B) The capital structure that maximizes the stock price is also the capital structure that maximizes the firm's times interest earned (TIE) ratio.
• C) Increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing; however, this still may raise the company's WACC.
• D) 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.
• E) The capital structure that maximizes the stock price is also the capital structure that minimizes the weighted average cost of capital (WACC).

---

Definitions:

Myers-Briggs Type Indicator

A personality inventory that categorizes individuals into one of 16 personality types based on preferences in how they perceive the world and make decisions.

Sensation-Seeking Scores

Measures used to quantify an individual's propensity to seek varied, novel, complex, and intense sensations and experiences.

Jung

Jung, typically referring to Carl Jung, is a Swiss psychiatrist and psychoanalyst who founded analytical psychology, known for concepts like the collective unconscious and archetypes.

Extraversion

A personality trait characterized by outgoingness, high energy, and a preference for social interactions and external stimulation.