If a Company Increases the Proportion of Debt in a Firm's

question 19

Multiple Choice

If a company increases the proportion of debt in a firm's capital structure, then:

• A)the increased debt is not covered by the tax shield.
• B)holders of common shares will expect a higher rate of return
• C)the company's equity beta will decrease
• D)the firm's WACC remains unchanged.

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Definitions:

Pay Equity

The principle of ensuring that employees are compensated equally for work of equal or comparable value, aimed at preventing discrimination based on gender, ethnicity, or other irrelevant factors.

Minimum Age

The lowest legal age at which an individual is permitted to engage in a specific activity or employment.

Lag Strategies

Compensation approaches where organizations pay below market rates due to financial constraints but aim to offer other benefits to attract and retain employees.

Labour-Intensive Firms

Companies that require a higher portion of labor input in their operations as compared to capital input, often leading to higher employment levels.