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:

Creative

Pertains to the ability or quality of generating original ideas, approaches, and solutions to problems or challenges.

Debt Financing

Refers to raising funds for company operations or expansion by borrowing money.

Equity Financing

Raising capital through the sale of shares in a company.

Entrepreneurial Start Up

A phase in the life of a business where an idea is transformed into a marketable product or service through innovative means.