Which of the Following Statements Is MOST Correct

question 127

Multiple Choice

Which of the following statements is MOST correct?

• A) Because the cost of debt is lower than the cost of equity, value-maximizing firms maintain debt ratios of close to 100%.
• B) Corporations that are 100% equity financed will have a much lower weighted average cost of capital because the lack of debt lowers their risk of bankruptcy.
• C) The source of capital with the lowest after-tax cost is preferred stock, because it is a hybrid security, part debt and part equity.
• D) The cost of a particular source of capital is equal to the investor's required rate of return after adjusting for the effects of both flotation costs and corporate taxes.

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Definitions:

Highly Interconnected

Elements, systems, or people that are closely linked and capable of exchanging information or resources efficiently and quickly.

Hobbyists

Individuals who pursue an activity or interest in their spare time for pleasure rather than for professional or financial gain.

Professional Groups

Organizations or networks of individuals in the same profession or occupation, often formed for sharing knowledge, best practices, and fostering professional development.

Social Interactions

Exchanges between individuals or groups, involving communication or cooperative behavior within social contexts.