Suppose You Plotted a Curve Which Showed a Firm U's

question 61

True/False

Suppose you plotted a curve which showed a Firm U's WACC on the vertical axis and its debt ratio on the horizontal axis.Then you plotted a similar curve for Firm V.The curve for firm U resembled a shallow "U," while that for Firm V resembled a sharp "V." Both firms have debt ratios that cause their WACCs to be minimized.Other things held constant,it would be easier for Firm V than for Firm U to maintain a steady dividend in the face of varying investment opportunities and earnings from year to year.

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Definitions:

Employment

The state of having paid work, being engaged in an occupation or job.

Marginal Productivity

The additional output that is produced by using one more unit of a given input, while keeping other inputs constant.

Flood

An overflow of water that submerges land that is usually dry, often caused by heavy rain, melting snow, or breach in water containment systems.

Inputs

Resources used in the process of production, including labor, materials, and capital.