Which of the Following Is NOT a Cost to the Firm

question 50

Multiple Choice

Which of the following is NOT a cost to the firm of increasing debt financing?

• A)investors will demand a higher interest rate on debt.
• B)the risk to common stockholders increases.
• C)stockholders will demand a higher return.
• D)the cost of common equity will decrease.

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Definitions:

Direct Materials Used

Direct materials used are raw materials that are directly incorporated into a finished product and can be directly associated with the product.

Manufacturing Overhead Cost

Expenses related to the production process that cannot be directly attributed to individual products, such as factory rent, utilities, and maintenance.

Direct Materials Used

The cost of raw materials that are directly incorporated into a finished product during a specific period.

Direct Labour Costs

Expenses incurred for workers who are directly involved in the manufacturing or production of goods or services.