Which of the Following Statements Is CORRECT

question 22

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 tradeoff theory would suggest
• That firms should increase their use of debt.

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Definitions:

Dress Professionally

Wearing clothing that meets the standards and expectations of a particular professional environment or setting.

Active Body States

Physical conditions or postures that indicate engagement, readiness, or participation, often important in communication and sports.

Fakes Attention

Pretending to give one's focus or interest to someone or something when in reality it is not genuine.

Unit

A single, distinct piece of something that forms part of a larger complex structure or system.