An Implicit Cost of Adding Debt to the Capital Structure

question 93

Multiple Choice

An implicit cost of adding debt to the capital structure is that it:

• A) adds interest expense to the operating statement.
• B) increases the required return on equity.
• C) reduces the expected return on assets.
• D) decreases the firm's beta.

---

Definitions:

Active Listening Skills

A technique of listening that involves paying full attention, understanding, responding, and remembering what is being said.

Nonverbal Skills

Abilities related to understanding and expressing oneself without the use of spoken language, including gestures, facial expressions, and body language.

Passive Communication

A communication style where the individual does not express their needs or desires clearly, often leading to misunderstandings.

Disregard Wants

Ignoring or overlooking the desires or preferences of oneself or others.