Which of the Following Statements Is CORRECT

question 57

Multiple Choice

Which of the following statements is CORRECT?

• A) In general,a firm with low operating leverage also has a small proportion of its total costs in the form of fixed costs.
• B) There is no reason to think that changes in the personal tax rate would affect firms' capital structure decisions.
• C) A firm with a relatively high business risk is more likely to increase its use of financial leverage than a firm with low business risk,assuming all else equal.
• D) If a firm's after-tax cost of equity exceeds its after-tax cost of debt,it can always reduce its WACC by increasing its use of debt.
• E) Suppose a firm has less than its optimal amount of debt.Increasing its use of debt to the point where it is at its optimal capital structure will decrease the costs of both debt and equity.

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Definitions:

Greenhouse Gases

Gases in Earth's atmosphere that trap heat, contributing to global warming and climate change.

Power Companies

are businesses involved in the production, distribution, and sale of electricity to consumers and other users.

Energy Saving

Practices, techniques, or products designed to reduce the amount of energy required to provide products and services, ultimately conserving energy resources.

Federal Trade Commission

A federal agency established to prevent anticompetitive, deceptive, and unfair business practices through law enforcement, advocacy, and education.