A Firm Has Determined Its Cost of Each Source of Capital

question 130

Multiple Choice

A firm has determined its cost of each source of capital and optimal capital structure, which is composed of the following sources and current market value proportions: Other things remaining constant, if the firm were to shift toward a capital structure with ________ the weighted average cost of capital will be higher.

• A) 45% long-term debt, 40% common stock, and 15% preferred stock
• B) 60% long-term debt, 20% common stock, and 20% preferred stock
• C) 20% long-term debt, 60% common stock, and 20% preferred stock
• D) 60% long-term debt, 30% common stock, and 10% preferred stock

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Definitions:

Hormone

A chemical substance produced in the body that controls and regulates the activity of certain cells or organs.

Attacked

To be aggressively targeted or assaulted, either physically, verbally, or through other means.

Sleep

A natural, recurring state of rest for the mind and body, characterized by altered consciousness and reduced sensory activity.

Horses

Large, four-legged mammals domesticated for riding, sports, work, and companionship, known for their strength, speed, and elegance.