Which of the Following Statements Is CORRECT

question 50

Multiple Choice

Which of the following statements is CORRECT?

• A) Since debt financing raises the firm's financial risk, increasing a company's debt ratio will always increase its 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 cost 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 cost of both debt and equity financing. However, this
• Action still may lower the company's WACC.
• E) Since a firm's beta coefficient it not affected by its use of financial leverage, leverage does not affect the cost of equity.

---

Definitions:

Team-Building

The process of developing stronger bonds and cooperation among team members through various activities and strategies to improve performance and morale.

Problem-Solving

The process of finding solutions to difficult or complex issues.

Facilitate Creativity

The process of making it easier or more likely for creative thoughts and ideas to emerge.

Supportive Behaviors

Actions that provide assistance, encouragement, and fostering a positive environment, often to enhance someone's well-being or performance.