As the Debt-To-Assets Ratio Rises,the WACC Is Reduced Because the After-Tax

question 65

True/False

As the debt-to-assets ratio rises,the WACC is reduced because the after-tax cost of debt is usually lower than the cost of equity.What limits the substitution of debt for equity in the capital structure is that as the debt-to-assets ratio rises,the costs of both components eventually increase.

---

Definitions:

Job Diagnostic Survey

A tool used to measure the elements of a job, as per the Job Characteristics Model, to determine how motivating the job is for employees.

Growth Need Strength

The degree to which an individual desires and is motivated by opportunities for personal growth and development within their job or career.

Job Context

The work environment and all the conditions, including tasks and responsibilities, that influence one's job.

Motivating Potential Score

A numeric index used to predict job satisfaction and motivation potential, based on the design of a job and five core job characteristics.