Which of the Following Statements Is Most Correct

question 46

Multiple Choice

Which of the following statements is most correct?

• A) The optimal capital structure minimizes the WACC.
• B) If the after-tax cost of equity financing exceeds the after-tax cost of debt financing,firms are always able to reduce their WACC by increasing the amount of debt in their capital structure.
• C) Increasing the amount of debt in a firm's capital structure is likely to increase the cost of both debt and equity financing.
• D) Answers a and c are both correct.
• E) Answers b and c are both correct.

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Definitions:

After-School Clubs

Organized programs that provide children with activities and learning opportunities outside of regular school hours.

Freud

Sigmund Freud was an Austrian neurologist and the founder of psychoanalysis, a clinical method for treating psychopathology through dialogue.

Pleasure Principle

A psychoanalytic concept proposed by Freud that suggests individuals seek pleasure and avoid pain to satisfy biological and psychological needs.

Reality Principle

A mechanism functioning within the conscious and unconscious that weighs the costs and benefits of an action before deciding to act.