With Perfect Capital Markets,leverage Has ________ Effect on Firm Value

question 57

Multiple Choice

With perfect capital markets,leverage has ________ effect on firm value or the firm's overall cost of capital.

• A) zero
• B) a positive
• C) a negative
• D) an unpredictable

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Definitions:

Monopoly

A market structure characterized by a single seller, selling a unique product in the market. The seller faces no competition, as he is the sole seller of goods with no close substitute.

Average Cost

This is the total cost divided by the number of goods produced, representing the cost on average for each unit produced.

Marginal Cost

The financial commitment for producing one more unit of a product or service.

Franchise

A type of license that grants a franchisee access to a franchisor’s proprietary knowledge, processes, and trademarks, allowing them to sell a product or service under the business's name.