Which of the Following Should Be Expected to Occur When

question 80

Multiple Choice

Which of the following should be expected to occur when a firm significantly increases its proportion of debt financing?

• A)the required return on debt will decrease.
• B)the required return on equity will decrease.
• C)the company cost of capital will increase.
• D)the company cost of capital will remain unchanged.

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Definitions:

Degrees of Freedom

Refers to the number of independent values or quantities which can be assigned to a statistical distribution or to the number of independent choices left after fixing the parameters of a system.

T Distribution

A type of probability distribution that is symmetrical and bell-shaped, used in hypothesis testing for small sample sizes.

Normal Distribution

A bell-shaped distribution that is symmetric about the mean, where data near the mean are more frequent in occurrence.

Degrees of Freedom

The number of independent values or quantities that can vary in the analysis without breaking any constraints.