The Benefits of Debt to the Corporation Include All of the Following

question 97

Multiple Choice

The benefits of debt to the corporation include all of the following EXCEPT

• A) Tax-deductible interest payments
• B) Increases the stock value when used heavily
• C) Fixed obligation
• D) Generally a lower overall cost than equity

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Definitions:

Expected Utility

A theory in economics that assesses the utility or satisfaction an agent expects to receive from different outcomes, taking into account their risk preferences.

Less Risk-averse Investors

Less risk-averse investors are those willing to take on greater risks for the potential of higher returns, as opposed to being risk-averse who prefer safer, lower-return investments.

Probability Distribution

A mathematical description of the likelihood of various outcomes from a random event or experiment.

Global Minimum Variance Portfolio

A global minimum variance portfolio is an investment portfolio that is constructed to achieve the lowest possible risk or variance among all possible portfolios of assets.