Which of the Following Statements Is CORRECT

question 22

Multiple Choice

Which of the following statements is CORRECT?

• A) the capital structure that maximizes the stock price is also the capital structure that maximizes earnings per share.
• B) the capital structure that maximizes the stock price is also the capital structure that maximizes the firm's times interest earned (tie) ratio.
• C) increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing; however, this still may raise the company's wacc.
• D) if congress were to pass legislation that increases the personal tax rate but decreases the corporate tax rate, this would encourage companies to increase their debt ratios.
• E) the capital structure that maximizes the stock price is also the capital structure that minimizes the weighted average cost of capital (wacc).

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Definitions:

Process Simulation

A technique used to model, analyze, and predict the behavior of processes, often through computer software, to enhance efficiency and decision-making.

Deterministic Arrival

Describes a process where the timing of arrivals in a system can be exactly predicted or scheduled, with no randomness involved.

Reneged

In queuing theory, it refers to a customer who enters a waiting line but decides to leave before being served.

Jockeyed

Manipulated or maneuvered positions or situations strategically for an advantage.