Which of the Following Statements Is Correct

question 105

Multiple Choice

Which of the following statements is correct?

• A) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the number of shares outstanding.
• B) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the amortization.
• C) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the volatility of those cash flows.
• D) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the tax liability.

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Definitions:

Capital-Saving

Technology or methods that allow the same level of production with less investment in capital.

Technological Advance

The process of introducing new technologies or improving existing ones to increase efficiency, productivity, or quality.

Capital Goods

Long-lasting goods that are used in the production of other goods or services, such as machinery, buildings, and equipment.

Investment In-Kind

Contributions of goods, services, or other non-monetary assets to an investment or project rather than cash.