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:

International Integrated Reporting

A framework for corporate reporting that combines financial and non-financial data to provide a holistic view of an organization's performance.

Value Creation

The process through which businesses generate additional worth for their stakeholders, including customers, shareholders, and employees.

Six Capitals

A framework that identifies six types of capital organizations use to create value: financial, manufactured, intellectual, human, social and relationship, and natural.

Eco-Intensity Measures

Quantitative assessments that evaluate the environmental impact of a company's activities in relation to its economic value or output.