Which of the Following Is Generally True About a fiRm's

question 95

Multiple Choice

Which of the following is generally true about a firm's cost of debt?

• A) It is equal to the yield to maturity on the firm's outstanding bonds.
• B) It is greater than the cost of equity.
• C) It normally cannot be observed, directly or indirectly, in the marketplace.
• D) It is greater than the average coupon payments on outstanding debt.
• E) It is equal to the coupon rate on the firm's outstanding bonds.

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Definitions:

Increases Liabilities

Refers to events or transactions that result in a rise in the amounts owed by a company, such as taking on new loans or issuing bonds.

Decreases Equity

Activities or transactions that reduce the owner's equity in a company, often through expenses, losses, or distributions to owners.

Earned Revenue

Earned revenue is income a company generates from its business activities, such as sales of goods or services, indicating work completed and value provided to customers.

Rights Of Creditors

Legal entitlements of creditors to receive payment from a debtor or claim on the assets of a debtor in case of default.