If a Firm Can Shift Its Capital Structure So as to Change

question 71

Multiple Choice

If a firm can shift its capital structure so as to change its weighted average cost of capital (WACC) , which of the following results would be preferred?

• A)The firm should try to decrease the WACC because such an action will increase the value of the firm.
• B)The firm should try to increase the WACC because such an action will increase the value of the firm.
• C)The firm should try to decrease the WACC because such an action will decrease the value of the firm.
• D)The firm should try to increase the WACC because such an action will decrease the value of the firm.
• E)The firm should not try to change the WACC because changing the WACC will not change the value of the firm.

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Definitions:

Decisional

Pertaining to or involving the process of making decisions.

Robert Katz

Identified for his theory on managerial skills, notably the importance of technical, human, and conceptual skills in management.

Technical Skills

The specific knowledge and abilities required to perform specialized tasks, especially relating to complex processes or machinery, often acquired through education and training.

Conceptual Skills

The ability to understand complex ideas, identify patterns, and solve problems through abstract thinking.