Which Statement Is Correct, All Else Held Constant

question 66

Multiple Choice

Which statement is correct, all else held constant?

• A)Beta is used to compute the return on equity and the standard deviation is used to compute the return on preferred.
• B)A decrease in a firm's WACC will increase the attractiveness of the firm's investment options.
• C)The aftertax cost of debt increases when the market price of a bond increases.
• D)If you have both the dividend growth and the security market line's costs of equity, you should use the higher of the two estimates when computing WACC.
• E)WACC is applicable only to firms that issue both common and preferred stock.

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Definitions:

Labor Rate Variance

The difference between the actual cost of labor and the budgeted cost, indicating how well a company has controlled its labor costs.

Labor Efficiency Variance

The difference between the actual hours worked by employees to produce goods and the expected hours, used to measure workforce efficiency.

Variable Overhead Rate Variances

The difference between the actual variable overhead incurred and the standard variable overhead allocated to production, indicating cost control efficiency.

Lubricants

Oils, greases, and other substances used to reduce friction between mechanical parts.