Which of the Following Statements Is True Concerning the Relationship

question 43

Multiple Choice

Which of the following statements is true concerning the relationship between the firm's cost of equity and its capital structure (as measured by the debt ratio) ?

• A) The exact relationship between the cost of equity and the debt ratio is difficult to determine.
• B) The range of debt ratios where the cost of equity begins to increase rapidly varies by firm and industry depending on the firm's age.
• C) The relationship is a saucer-shaped curve.
• D) The relationship is determined by the static tradeoff theory.

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