An Increase in a Firm's Financial Leverage Will

question 76

Multiple Choice

An increase in a firm's financial leverage will:

• A) increase the variability in earnings per share.
• B) always reduce the operating risk of the firm.
• C) increase the value of the firm in a non-MM world.
• D)increase the WACC.

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Definitions:

Sales

The activities involved in selling goods or services in return for money or other compensation.

Decline

A decrease in size, number, value, or strength.

Grow

Increase in size, amount, or value.

Compounded Monthly

An interest calculation method where interest is added to the principal once a month, affecting the overall interest earned or paid.