Which of the Following Statements Is CORRECT

question 71

Multiple Choice

Which of the following statements is CORRECT?

• A) A firm can use retained earnings without paying a flotation cost.Therefore,while the cost of retained earnings is not zero,its cost is generally lower than the after-tax cost of debt.
• B) The capital structure that minimizes a firm's weighted average cost of capital is also the capital structure that maximizes its stock price.
• C) The capital structure that minimizes the firm's weighted average cost of capital is also the capital structure that maximizes its earnings per share.
• D) If a firm finds that the cost of debt is less than the cost of equity,increasing its debt ratio must reduce its WACC.
• E) Other things held constant,if corporate tax rates declined,then the Modigliani-Miller tax-adjusted theory would suggest that firms should increase their use of debt.

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Definitions:

Home-Country National

A term referring to employees who are working in their country of origin.

Hammer

A tool with a heavy head and a handle, used for breaking things or driving in nails.

Home-Country Nationals

Employees who are citizens of the country where their company is headquartered, even if they work abroad.

Technical Knowledge

The specific expertise and skills related to the practical aspects of operations, processes, and technology within a specific field or industry.