Which of the Following Statements Is Correct

question 57

Multiple Choice

Which of the following statements is correct?

• A)In general, a firm with low operating leverage also has a small proportion of its total costs in the form of fixed costs.
• B)There is no reason to think that changes in the personal tax rate would affect firms' capital structure decisions.
• C)A firm with high business risk is more likely to increase its use of financial leverage than a firm with low business risk, assuming all else is equal.
• D)If a firm's after-tax cost of equity exceeds its after-tax cost of debt, it can always reduce its WACC by increasing its use of debt.

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Definitions:

Systematic Desensitization

A method in behavioral therapy used to reduce phobic or anxiety responses, involving gradual exposure to the feared object or situation.

Psychodynamic Therapy

A form of depth psychology, the primary focus of which is to reveal the unconscious content of a client's psyche in an effort to alleviate psychic tension.

Self-blame

The act of attributing personal failures or mishaps to one's own decisions or characteristics.

Negative Thinking

A pattern of focusing on the worst in everything, anticipating failure or disaster, and seeing the negative aspects of all situations.