Which of These Makes the Following a True Statement? Diversification

question 11

Multiple Choice

Which of these makes the following a true statement? Diversification resulting from a merger can:

• A)make the debt of the merged firm more risky, thus lowering the cost of capital.
• B)make the debt of the merged firm less risky, thus lowering the cost of capital.
• C)make the debt of the merged firm less risky, thus raising the cost of capital.
• D)None of these make the statement true.

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Definitions:

Direct Labor Budget

A detailed plan that shows the amount of direct labor hours required to meet production needs and the associated costs.

Direct Labor-Hours

Hours attributed to workers who are directly involved in the creation or assembly of a company's products.

Budgeted Production

The planned level of production output, determined as part of a company's budgeting process to meet expected demand and inventory requirements.

Direct Labor Cost

The total cost of wages paid to employees who are directly involved in the production of goods or services.