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:

Disorganized Behavior

Acting in strange or unusual ways, including strange movement of limbs and inappropriate self-care, such as failing to dress properly or bathe.

Schizophrenia

A mental disorder characterized by delusions, hallucinations, disorganized speech and behavior, and impaired cognitive ability.

Negative Symptom

A term often used in psychiatry to describe the absence or diminution of normal behavior or characteristics, such as lack of emotion or motivation.

Positive Symptom

In the context of psychological disorders, referring to an excess or distortion of normal functions, such as hallucinations or delusions.