All of the Following Statements Are Correct Except

question 87

Multiple Choice

All of the following statements are correct except:

• A) The firm’s optimum debt/equity mix maximizes the firm’s cost of capital, which in turn helps the firm to maximize shareholder wealth
• B) A firm’s mix of debt and equity used to finance its assets defines the firm’s capital structure.
• C) A nonoptimal capital structure with either too much or too little debt leads to higher financing costs, and the firm will likely reject some capital budgeting projects that could have increased shareholder wealth with an optimal financing mix.
• D) A project’s NPV represents the increase in shareholders’ wealth from undertaking a project; thus, a lower weighted average cost of capital gives higher project net present values and results in higher levels of shareholder wealth.
• E) All of the above statements are correct.

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Definitions:

Market Rates

The average or expected pay for a specific job role in the employment market.

Hybrid Compensation-Level Strategy

A remuneration approach that combines elements of both fixed salaries and variable pay based on performance.

Industrial Sectors

Categories of the economy based on the type of activity performed, such as manufacturing, service, agriculture, and technology.

Employee Groups

Categories or clusters of employees within an organization who share similar job functions, levels, or characteristics.