An Implicit Cost of Increasing the Proportion of Debt in a Firm's

question 92

Multiple Choice

An implicit cost of increasing the proportion of debt in a firm's capital structure is that:

• A) the firm's asset beta will increase.
• B) shareholders will demand a higher rate of return.
• C) the tax shield will not apply to the added debt.
• D) the equity-to-value ratio will decrease.

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Definitions:

Monetary Compensation

Financial payment provided to workers for their labor, including salaries, wages, bonuses, and benefits.

Sociability

The quality of being friendly, social, and willing to engage with others in social settings.

Personality Characteristics

Traits and qualities that define an individual's distinct patterns of thoughts, feelings, and behaviors, contributing to their unique identity.