Use the Following Information to Answer the Question(s)below

question 49

Multiple Choice

Use the following information to answer the question(s) below.
Consider the following information regarding corporate bonds:
-If a firm's excess cash holdings are greater than its debt,using net debt as the measure of leverage will result in:

• A)its unlevered beta and cost of capital equalling zero.
• B)its unlevered beta and cost of capital being greater than its equity beta and cost of capital.
• C)the risk of the firm's equity being increased by its cash holdings in excess of its operating needs.
• D)the risk of the firm's debt being increased by its cash holdings in excess of its operating needs.

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Definitions:

Hatch Act

A U.S. federal law enacted in 1939 that restricts the political activities of government employees in order to ensure the neutrality of the public service.

Agricultural Science

The study of the sciences related to the production of crops and livestock, and management of soil and water resources.

Agricultural Colleges

Institutions focused on teaching agricultural sciences, techniques, and management, often established under the Morrill Act of 1862.

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The remote, rural areas in the southern United States, historically characterized by frontier conditions and a distinct culture.