Which of the Following Statements Is Correct

question 44

Multiple Choice

Which of the following statements is correct?

• A)A firm can use retained earnings without paying a flotation cost. Therefore, while the cost of retained earnings is not zero, its cost is generally lower than the after-tax cost of debt.
• B)The capital structure that minimizes a firm's weighted average cost of capital is also the capital structure that maximizes its stock price.
• C)The capital structure that minimizes the firm's weighted average cost of capital is also the capital structure that maximizes its earnings per share.
• D)If a firm finds that the cost of debt is less than the cost of equity, increasing its debt ratio must reduce its WACC.

Recognize the process and implications of liquidation under Chapter 7.

Understand the powers of a bankruptcy trustee, especially in terms of avoiding fraudulent transfers.

Identify the types of transfers and payments that can be challenged or recovered in bankruptcy proceedings.

Recognize the exemptions provided under the Bankruptcy Code and distinguish between dischargeable and nondischargeable debts.

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