Which of the Following Is True

question 8

Multiple Choice

Which of the following is true?

• A) The MC curve intersects AFC at its minimum point.
• B) If MC is below AVC, AVC must be increasing.
• C) If MC is above ATC, ATC must be increasing.
• D) None of the above.

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Definitions:

Unlevered Rate

The unlevered rate refers to the return on an investment or the cost of capital without considering the impact of financial leverage, representing the risk of an investment independent of its capital structure.

Cost of Debt

The actual rate at which a corporation incurs cost on its existing financial obligations, such as bonds and loans.

Debt/Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets, often used to assess financial leverage.

Cost of Debt

The cost of debt is the effective interest rate a company pays on its debts, including loans and bonds, accounting for tax benefits.