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:

Advertising Expense

Costs incurred by a business to promote its products or services through various media channels.

Proportion

A part, share, or number considered in comparative relation to a whole.

Sales

Income received from selling goods or services over a period of time.

Direct Expenses

Costs that can be directly traced to a specific cost object, such as a product, department, or project.