Which of the Following Statements Is CORRECT

question 43

Multiple Choice

Which of the following statements is CORRECT?

• A) When a company increases its debt ratio, the costs of equity and debt both increase. Therefore, the WACC must also increase.
• B) The capital structure that maximizes the stock price is generally
• The capital structure that also maximizes earnings per share.
• C) All else equal, an increase in the corporate tax rate would tend to
• Encourage a company to increase its debt ratio.
• D) Since debt financing raises the firm's financial risk, increasing a
• Company's debt ratio will always increase its WACC.
• E) Since debt is cheaper than equity, increasing a company's debt ratio will always reduce its WACC.

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Definitions:

Medical Model

A framework that treats mental and physical conditions as diseases to be diagnosed and treated by healthcare professionals.

Hospital Births

Childbirth that takes place in a hospital setting, often involving medical professionals and intervention.

Squatting Position

A posture where the knees are bent and the buttocks rest on or near the heels, often used for labor or low-intensity tasks.

Caregiving Responsibility

The obligation to look after someone who is unable to care for themselves, often requiring emotional, physical, and financial support.