Which of the Following Statements About Transaction Costs Is True

question 57

Multiple Choice

Which of the following statements about transaction costs is true?

• A)The low transaction costs associated with issuing new equity mean that smaller firms are often 100% equity financed.
• B)Transaction costs are small enough to be ignored when making a decision regarding capital structure.
• C)Firms with lower credit ratings may face higher transaction costs than firms with good credit ratings.
• D)Transaction costs cause debt financing to be favored over equity financing.