Which of the Following Statements Is CORRECT

question 32

Multiple Choice

Which of the following statements is CORRECT?

• A)The capital structure that maximizes the stock price is also the capital structure that minimizes the cost of equity from retained earnings (r_s).
• B)The capital structure that maximizes the stock price is also the capital structure that maximizes earnings per share.
• C)The capital structure that maximizes the stock price is also the capital structure that maximizes the firm's times interest earned (TIE) ratio.
• D)If a company increases its debt ratio, this will typically increase the marginal costs of both debt and equity, but it still may reduce the company's WACC.
• E)If Congress were to pass legislation that increases the personal tax rate but decreases the corporate tax rate, this would encourage companies to increase their debt ratios.

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Definitions:

General Environment

The economic, legal-political, socio-cultural, technological, and natural environment conditions in which an organization operates.

Organizations

Groups of people who work together in a structured way to achieve a collective goal or set of objectives.

Socio-cultural Conditions

refer to the combination of social and cultural factors that influence individuals' behaviors, values, and attitudes in a society.

Religious Diversity

The existence and acceptance of a wide variety of religious beliefs and practices within a society or organization.