Which One of the Following Statements Is Correct? Assume the Pretax

question 98

Multiple Choice

Which one of the following statements is correct? Assume the pretax cost of debt is less than the cost of equity.

• A)A firm may change its capital structure if the government changes its tax policies.
• B)A decrease in the dividend growth rate increases the cost of equity.
• C)A decrease in the systematic risk of a firm will increase the firm's cost of capital.
• D)A decrease in a firm's debt-equity ratio will decrease the firm's cost of capital.
• E)The cost of preferred stock decreases when the tax rate increases.

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Definitions:

Market Share

The portion of a market controlled by a particular company, measured by the proportion of sales that company enjoys compared to total industry sales.

Horizontal Coordination

An organizational strategy that involves the collaboration and communication across different departments or units to achieve common goals.

Vertical Coordination

The organization and integration of the successive stages of production and distribution within an industry.

Top-Down Coordination

An organizational management style where decisions and policies are made at the highest level and passed down through the hierarchy to lower-level staff.