Effective Capital Structure Decisions Can Lower the Cost of Capital

question 147

True/False

Effective capital structure decisions can lower the cost of capital, resulting in higher NPVs and more acceptable projects, thereby increasing the value of a firm.

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Definitions:

Flexible Interest Rate

refers to an interest rate that can change over the term of a loan or deposit based on market conditions.

Credit Supplied

The total amount of credit available to borrowers from lenders within the market.

Aggregate Demand Curve

A graphical representation that shows the total amount of goods and services demanded at different price levels in an economy.

Equilibrium Real GDP

The level of Gross Domestic Product at which aggregate supply equals aggregate demand, resulting in no unintended inventory build-up or depletion.