Which of the Following Statements Is CORRECT

question 10

Multiple Choice

Which of the following statements is CORRECT?

• A) the capital structure that maximizes the stock price is generally the capital structure that also maximizes earnings per share.
• B) all else equal, an increase in the corporate tax rate would tend to encourage a company to increase its debt ratio.
• C) since debt financing raises the firm's financial risk, increasing a company's debt ratio will always increase its wacc.
• D) since debt is cheaper than equity, increasing a company's debt ratio will always reduce its wacc.
• E) when a company increases its debt ratio, the costs of equity and debt both increase. therefore, the wacc must also increase.

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Definitions:

Overexertion

Excessive physical or mental effort that can lead to injury or illness.

Cerebrovascular Accidents

Medical terminology for a stroke, where blood flow to a part of the brain is suddenly interrupted or reduced, causing brain damage.

Persistent Hypoxia

A condition where there is a consistently low level of oxygen in the tissues, which can lead to multiple system failure if not corrected.

Cardiac Defect

An abnormality in the structure of the heart that is present from birth, potentially affecting the walls, valves, arteries, or veins of the heart.