Which of the Following Statements Is CORRECT

question 37

Multiple Choice

Which of the following statements is CORRECT?

• A) When a company increases its debt ratio,the costs of equity and debt both increase.Therefore,the WACC must also increase.
• B) The capital structure that maximizes the stock price is generally the capital structure that also maximizes earnings per share.
• C) All else equal,an increase in the corporate tax rate would tend to encourage companies to increase their debt ratios.
• D) Since debt financing raises the firm's financial risk,increasing a company's debt ratio will always increase its WACC.
• E) Since the cost of debt is generally fixed,increasing the debt ratio tends to stabilize net income.

---

Definitions:

Sales Promotions

Marketing strategies aimed at stimulating consumer purchasing or dealer effectiveness, such as discounts, coupons, and demonstrations.

Sales Promotion Tools

Various marketing techniques aimed at increasing demand, stimulating sales, and attracting new customers, such as coupons, discounts, and contests.

Rebates

A return of part of the original payment for some service or merchandise, often used as a promotion technique to increase sales.

Skateboarding Events

Organized competitions or exhibitions where skateboarders showcase their skills in various disciplines, such as street, vert, and park.