Which of the Following Statements Is CORRECT

question 59

Multiple Choice

Which of the following statements is CORRECT?

• A) If corporate tax rates were decreased while other things were held constant, and if the Modigliani-Miller tax-adjusted tradeoff theory of capital structure were correct, this would tend to cause
• Corporations to decrease their use of debt.
• B) A change in the personal tax rate should not affect firms' capital
• Structure decisions.
• C) "Business risk" is differentiated from "financial risk" by the fact that financial risk reflects only the use of debt, while business risk reflects both the use of debt and such factors as sales
• Variability, cost variability, and operating leverage.
• D) The optimal capital structure is the one that simultaneously (1) maximizes the price of the firm's stock, (2) minimizes its WACC,
• And (3) maximizes its EPS.
• E) If changes in the bankruptcy code make bankruptcy less costly to corporations, then this would likely reduce the debt ratio of the average corporation.

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Definitions:

Tragedy of the Commons

A situation where individual users, acting independently according to their own self-interest, deplete or spoil shared resources, to the detriment of all users.

Sustainability

The practice of maintaining processes or states in a manner that prevents depletion of natural resources, ensuring long-term environmental balance.

Sustainability

The practice of maintaining processes or systems in a way that does not deplete natural resources or harm the environment, ensuring long-term ecological balance.

Greenhouse Gas Emissions

The release of gases into Earth's atmosphere that trap heat, contributing to global warming and climate change.