Which of the Following Is NOT a Cost to the Firm

question 33

Multiple Choice

Which of the following is NOT a cost to the firm of increasing debt financing?

• A)Investors will demand a higher interest rate on debt
• B)The risk to common stockholders increases
• C)Stockholders will demand a higher return
• D)The cost of common equity will decrease

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Definitions:

FUTA Payable

A liability account that records the amount owed by a company for the Federal Unemployment Tax Act contributions, payable to the federal government.

SUTA Payable

A liability account that records amounts owed for the state unemployment tax.

Social Security Administration

A U.S. government agency that administers social programs covering disability, retirement, and survivors' benefits, among others.

W-2

A W-2 form is a tax document issued by employers in the United States to employees, indicating the amount of wages paid and taxes withheld during the year.