Consider the Following Equation for the Question(s) Below

question 98

Multiple Choice

Consider the following equation for the question(s) below.

-Which of the following statements is FALSE?

• A) With no debt, the WACC is equal to the unlevered equity cost of capital.
• B) With perfect capital markets, a firm's WACC is dependent on its capital structure and is equal to its equity cost of capital only if the firm is unlevered.
• C) As the firm borrows at the low cost of capital for debt, its equity cost of capital rises, but the net effect is that the firm's WACC is unchanged.
• D) As debt has a lower cost of capital than equity, higher leverage lowers a firm's WACC.

Analyze the effects of generational cohorts on market trends and organizational strategies.

Grasp the concept and implications of offshoring and reshoring in the global business environment.

Recognize the relevance of diversity issues within the socio-cultural conditions of the business environment.

Understand different types of trusts and their uses.

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Definitions:

Operating Capacity

The maximum level of activity that a company can sustain with its current resources and infrastructure without incurring additional costs.

Investment Center

A business unit or department that is responsible for its own revenues, expenses, and investment in assets, with its performance measured by its return on investment.

Controllable Margin

The portion of profit or income directly influenced by the management decisions, typically excluding fixed costs.

Required Return

The minimum expected return by investors for providing capital, based on the risk of the investment.