The Use of Homemade Leverage

question 112

Multiple Choice

The use of homemade leverage:

• A) Optimizes the profitability of a firm.
• B) Minimizes the weighted average cost of capital for a firm.
• C) Makes the capital structure of a firm irrelevant.
• D) Is effective only when investors own shares of all-equity firms.
• E) Increases the debt-equity ratio of a firm.

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Definitions:

Psychoanalytic Theory

A theory developed by Freud that emphasizes unconscious psychological processes and contends that childhood experiences significantly influence adult personality.

Control of Behaviour

The regulation or direction of actions and conduct according to principles or a guiding method.

Unconscious

The part of the mind that contains thoughts, memories, and desires that are not within personal awareness but still influence behavior.

Personality

The blend of traits and attributes that create a person's unique personality.