Which of the Following Statements Is CORRECT

question 61

Multiple Choice

Which of the following statements is CORRECT?

• A) If Congress lowered corporate tax rates while other things were held constant,and if the Modigliani-Miller tax-adjusted theory of capital structure were correct,this would tend to cause corporations to decrease their use of debt.
• B) A change in the personal tax rate should not affect firms' capital structure decisions.
• C) "Business risk" is differentiated from "financial risk" by the fact that financial risk reflects only the use of debt,while business risk reflects both the use of debt and such factors as sales variability,cost variability,and operating leverage.
• D) The optimal capital structure is the one that simultaneously (1)maximizes the price of the firm's stock, (2)minimizes its WACC,and (3)maximizes its EPS.
• E) If changes in the bankruptcy code made bankruptcy less costly to corporations,this would likely reduce the average corporation's debt ratio.

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Definitions:

Active Listening

Fully concentrating on what is being said rather than passively hearing the message of the speaker, involving feedback and engagement.

Free Association

A psychoanalytic process in which the patient says whatever comes to mind without censorship as a way to explore the unconscious.

Cognitive Therapy

A psychological treatment approach that seeks to address maladaptive thinking patterns to alleviate psychological distress and promote adaptive behavior and cognition.

Behavior Can Be Conditioned

The concept that actions can be influenced or learned through associations with outcomes or stimuli, as seen in classical and operant conditioning.