Which of the Following Statements Is True Concerning Debt That

question 4

Multiple Choice

Which of the following statements is true concerning debt that has no risk of default?

• A)A company's cost of capital increases as more debt is used in its capital structure.
• B)The cost of debt increases as more debt is used in the company's capital structure.
• C)The cost of debt increases as more debt is used in the company's capital structure because total risk increases.
• D)The cost of equity capital increases with increasing proportions of debt because,although the total amount of risk does not change,risk is concentrated on a proportionately smaller amount of equity capital.

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Definitions:

Finished Goods

Products that have completed the manufacturing process but have not yet been sold to customers.