By Adding Leverage,the Returns of the Firm Are Split Between

question 57

Multiple Choice

By adding leverage,the returns of the firm are split between debt holders and equity holders,but equity-holder risk increases because:

• A)interest payments can be rolled over.
• B)dividends are paid first.
• C)debt and equity have equal priority.
• D)interest payments have first priority.
• E)interest payments are so high.

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Definitions:

Supply

The total amount of a product or service that is available for purchase at any given price.

Dollar Appreciates

A situation where the value of the U.S. dollar increases compared to other currencies, affecting international trade and economic dynamics.

Interest Rates

The cost of borrowing money or the rate at which interest is paid by a borrower for the use of money.

Appreciation

An increase in the value of an asset over time, which can result from various factors including inflation, increased demand, or improvements to the asset.