Changing the Capital Structure by Adding Debt Will Not

question 101

Multiple Choice

Changing the capital structure by adding debt will not:

• A)increase the return that shareholders require.
• B)leave the WACC unaffected.
• C)decrease debt holder risk.
• D)increase the cost of debt.

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Definitions:

Pharynx

The muscular tube that connects the mouth and nasal passages with the esophagus and larynx, serving both respiratory and digestive functions.

Esophagus

The muscular tube connecting the throat (pharynx) with the stomach, responsible for moving swallowed foods and liquids.

Mouth

The opening in the body of most animals through which food is ingested.

Villi

Small, finger-like projections that extend into the lumen of the small intestine, increasing its surface area for nutrient absorption.