Taking on Additional Debt Will Reduce the Cost of Equity

question 18

True/False

Taking on additional debt will reduce the cost of equity.

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Definitions:

Profit

The financial gain realized when the revenue earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Marginal Revenue

The additional revenue that a firm receives from selling one more unit of a good or service.

Marginal Cost

The extra expense resulting from the manufacture of an additional unit of a product or service.

Competitive Price-Taker

A market participant who cannot influence the price on the market but instead must accept the prevailing market price.