Which of the Following Statements Is Correct

question 53

Multiple Choice

Which of the following statements is correct?

• A)The capital structure that maximizes the common share price is also the capital structure that minimizes the WACC.
• B)The capital structure that maximizes the common share price is also the capital structure that maximizes earnings per share.
• C)Increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing; however, this still may raise the company's WACC.
• D)Increasing personal tax rate but decreasing corporate tax rate would encourage companies to increase their debt ratios.

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Definitions:

Nonprogrammed Decision

Decisions made in response to situations that are unique, poorly defined, and largely unstructured.

Standard Operating Procedure

A set of written instructions that document a routine or repetitive activity followed by an organization.

Routine Servicing

Regular maintenance or checks to ensure that systems, machines, or vehicles are operating efficiently and safely.

Solution Implementation

The process of executing a plan or method to solve a problem or address a specific need.