As Debt Is Substituted for Equity in the Capital Structure

question 126

Multiple Choice

As debt is substituted for equity in the capital structure and the debt ratio increases, all of the following statements about the component costs of capital are true EXCEPT

• A) the cost of equity continually increases.
• B) the cost of debt continually increases.
• C) the overall cost of capital first declines, reaches a minimum, and then rises again.
• D) the overall cost of capital continually increases.

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Definitions:

Coarse Adjustment Knob

The coarse adjustment knob is a control on a microscope used to bring the specimen into general focus by moving the stage up or down.

Fine Adjustment Knob

A control on a microscope used to make small adjustments in focus, refining the clarity and detail of the viewed specimen.

Coverslip

A thin piece of glass or plastic used to cover specimens on a microscope slide, protecting the sample and lens.

Eyepiece

The lens or group of lenses at the viewing end of a telescope or microscope, through which the observer looks to see the magnified image.