Which of the Following Statements Is Correct

question 63

Multiple Choice

Which of the following statements is correct?

• A)A decrease in the firm's marginal corporate tax rate will decrease the weighted average cost of capital.
• B)Flotation costs can decrease the weighted average cost of capital.
• C)The cost of debt is based on the cost of all liabilities, including accounts payable and accruals.
• D)None of these statements is correct.

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Definitions:

Purely Competitive

A purely competitive market is characterized by many buyers and sellers, homogeneous products, and no barriers to entry or exit, leading to price taking behavior by firms.

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs, as opposed to accounting profit which only subtracts explicit costs.

Purely Competitive

A market structure characterized by a large number of sellers and buyers, homogeneous products, and no barriers to entry or exit.

Short-run Supply Curve

Represents the relationship between price and quantity supplied over a short period, assuming some inputs are fixed.