Which of the Following Statements Is CORRECT

question 32

Multiple Choice

Which of the following statements is CORRECT?

• A) there is no reason to think that changes in the personal tax rate would affect firms' capital structure decisions.
• B) a firm with high business risk is more likely to increase its use of financial leverage than a firm with low business risk, assuming all else equal.
• C) if a firm's after-tax cost of equity exceeds its after-tax cost of debt, it can always reduce its wacc by increasing its use of debt.
• D) suppose a firm has less than its optimal amount of debt. increasing its use of debt to the point where it is at its optimal capital structure will decrease the costs of both debt and equity financing.
• E) in general, a firm with low operating leverage also has a small proportion of its total costs in the form of fixed costs.

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Definitions:

Reliant

Depending on someone or something for support, assistance, or supply.

Declarative Memory

The aspect of human memory that stores facts and events, making it possible for individuals to consciously recall and articulate their knowledge.

Episodic Memory

A form of memory that deals with remembering distinct events, conditions, and personal experiences over a prolonged period.

Semantic Memory

A type of long-term memory involving the ability to remember meanings, concepts, facts, and general knowledge about the world.