An Implicit Cost of Adding Debt to the Capital Structure

question 3

Multiple Choice

An implicit cost of adding debt to the capital structure is that it:

• A)Adds interest expense to the operating statement
• B)Increases the required return on equity
• C)Reduces the expected return on assets
• D)Decreases the firm's beta

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Definitions:

Insincere

Lacking honesty and genuine feelings; not expressing true intentions.

Innocuous Statements

Innocuous statements are remarks or comments that are harmless and not intended to offend or provoke controversy.

Concessions

Certain compromises or allowances made by a party in a negotiation or discussion to reach an agreement.

Likability

Likability refers to the qualities that make an individual appealing or attractive to others, often contributing to positive interpersonal relationships.