Which of the Following Statements Is Correct

question 46

Multiple Choice

Which of the following statements is correct?

• A) All else equal, an increase in a company's stock price will increase its marginal cost of retained earnings, rs.
• B) All else equal, an increase in a company's stock price will increase its marginal cost of new common equity, re.
• C) Since the money is readily available, the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt.
• D) If a company's tax rate increases but the YTM of its noncallable bonds remains the same, the after-tax cost of its debt will fall.

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Definitions:

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs.

TC

Total Cost, which is the total expense incurred in reaching a particular level of output.

Profit-Maximizing

The act of adjusting production and sales to achieve the highest possible profit under given market conditions.

Demand

The quantity of a product or service that consumers are willing and able to purchase at a given price.