Which One of These Statements Is Correct

question 55

Multiple Choice

Which one of these statements is correct?

• A) Capital structure has no effect on shareholder value.
• B) The optimal capital structure occurs when the cost of equity is minimized.
• C) The optimal capital structure maximizes shareholder value.
• D) Shareholder value is maximized when WACC is also maximized.
• E) Unlevered firms have more value than levered firms when firms are profitable.

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Definitions:

Familywise Error

The chance of encountering one or more incorrect rejections, known as type I errors, while testing several hypotheses.

Critical Value

A critical value is a point on the scale of a statistical distribution that corresponds to a specified level of significance for the testing of a hypothesis.

Complex Comparisons

Refers to analyses involving multiple comparisons within a set of data, typically requiring adjustment of significance levels to account for the increased risk of Type I error.

Analytical Comparisons

The process of examining differences between groups or variables using statistical methods.