Which of the Following Statements Is CORRECT

question 20

Multiple Choice

Which of the following statements is CORRECT?

• A) Since debt financing raises the firm's financial risk,increasing the target debt ratio will always increase the WACC.
• B) Since debt financing is cheaper than equity financing,raising a company's debt ratio will always reduce its WACC.
• C) Increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing.However,this action still may raise the company's WACC.
• D) Increasing a company's debt ratio will typically increase the marginal costs of both debt and equity financing.However,this action still may lower the company's WACC.
• E) Since a firm's beta coefficient is not affected by its use of financial leverage,leverage does not affect the cost of equity.

---

Definitions:

Written Summary

A concise representation of the main points or features of a document or discourse, put into writing.

Pronunciation

The sounding out of words.

Telephone Skills

The ability to communicate effectively and courteously over the phone, important for providing quality customer service and handling inquiries.

Saying Words

The act of verbally articulating or pronouncing words.