Which of the Following Statements Is CORRECT

question 19

Multiple Choice

Which of the following statements is CORRECT?

• A) In general, a firm with low operating leverage also has a small proportion of its total costs in the form of fixed costs.
• B) There is no reason to think that changes in the personal tax rate
• Would affect firms' capital structure decisions.
• C) A firm with high business risk is more likely to increase its use of financial leverage than a firm with low business risk, assuming
• All else equal.
• D) If a firm's after-tax cost of equity exceeds its after-tax cost of
• Debt, it can always reduce its WACC by increasing its use of debt.
• E) Suppose a firm has less than its optimal amount of debt. Increasing its use of debt to the point where it is at its optimal capital
• Structure will decrease the costs of both debt and equity financing.

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Definitions:

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The number or proportion of individuals who receive an offer of admission from an institution or program to which they applied.

Simpson's Paradox

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Relating to, measuring, or measured by the quantity of something rather than its quality.

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