Which Is Not True About Debt Financing and the Weighted

question 12

Multiple Choice

Which is not true about debt financing and the weighted average cost of capital?

• A) Debt is usually the cheapest source of financing
• B) As the level of debt increases beyond the optimum capital structure,the cost of capital increases
• C) No debt in the firm's capital structure will minimize the firm's weighted-average cost of capital
• D) The cost of debt and the weighted average cost of capital both go down as the tax rate goes up.

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Definitions:

Multiple Disc Clutches

Clutch systems that use several discs and plates, providing higher torque transmission and smoother engagement, commonly seen in heavy machinery and performance vehicles.

Truck Automatic

Refers to trucks equipped with automatic transmissions, which automatically change gear ratios as the vehicle moves, without the need for manual shifting.

Power Transfer

The act of conveying electrical energy or mechanical force from one component or system to another.

Planetary Gearset

A complex gear system that consists of one central 'sun' gear, several 'planet' gears that revolve around it, and an outer 'ring' gear, allowing for multiple gear ratios.