All of the Following Statements Are Correct, Except

question 33

Multiple Choice

All of the following statements are correct, except:

• A) The firm's optimum debt/equity mix minimizes the firm's cost of capital, which in turn helps the firm to maximize shareholder wealth
• B) A firm's mix of debt and equity used to finance its assets is not the firm's capital structure.
• C) A non-optimal capital structure with either too much or too little debt leads to higher financing costs, and the firm will likely reject some capital budgeting projects that could have increased shareholder wealth with an optimal financing mix.
• D) A project's NPV represents the increase in shareholders' wealth from undertaking a project; thus, a lower weighted average cost of capital gives higher project net present values and results in higher levels of shareholder wealth.

Understand the effects of stock issuance and repurchase on a company’s assets, liabilities, and equity.

Recognize the accounting for stock dividends and stock splits.

Understand the concept of earnings per share and how it is calculated.

Distinguish between authorized, issued, and outstanding shares of stock.

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Definitions:

Pseudo-Patients

Individuals who simulate illness to study the treatment environment and practices within mental health institutions, notably in the Rosenhan experiment.

Differential Association

A theory in criminology suggesting that individuals learn deviant behavior from those close to them who provide models of and opportunities for deviance.

Deviant Peers

Individuals within a peer group who engage in activities considered deviant by mainstream society, potentially influencing others to do the same.

Les Whitbeck

A sociologist known for his research on mental health, substance abuse, and developmental issues among homeless and runaway youths.