Which of the Following Statements Is CORRECT

question 39

Multiple Choice

Which of the following statements is CORRECT?

• A) the capital structure that minimizes a firm's weighted average cost of capital is also the capital structure that maximizes its stock price.
• B) the capital structure that minimizes the firm's weighted average cost of capital is also the capital structure that maximizes its earnings per share.
• C) if a firm finds that the cost of debt is less than the cost of equity, increasing its debt ratio must reduce its wacc.
• D) other things held constant, if corporate tax rates declined, then the modigliani-miller tax-adjusted tradeoff theory would suggest that firms should increase their use of debt.
• E) a firm can use retained earnings without paying a flotation cost. therefore, while the cost of retained earnings is not zero, its cost is generally lower than the after-tax cost of debt.

Comprehend the role of risk and return in financing mergers, including the use of junk bonds.

Understand the concept of value creation through mergers and how it is measured.

Identify defensive strategies used by firms against hostile takeovers.

Understand the historical context and impact of major merger waves.

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Definitions:

Supportive

Characterizing actions or attitudes that seek to uplift, help, or encourage others, often enhancing morale or performance.

Co-workers

Individuals who share the same work environment and are employed by the same organization, but do not necessarily have the same job responsibilities.

Anglo Cultural Cluster

refers to a group of countries with cultural practices and values that are predominantly influenced by British heritage.

Assertiveness Orientation

A focus on the ability to express one’s opinions and needs in a confident and direct manner, often in the context of personal development or leadership training.