Which of the Following Statements Is CORRECT

question 4

Multiple Choice

Which of the following statements is CORRECT?

• A) There is no reason to think that changes in the personal tax rate would affect firms' capital structure decisions.
• B) A firm with high business risk is more likely to increase its use of financial leverage than a firm with low business risk, assuming all else equal.
• C) If a firm's after-tax cost of equity exceeds its after-tax cost of debt, it can always reduce its WACC by increasing its use of debt.
• D) Suppose a firm has less than its optimal amount of debt.Increasing its use of debt to the point where it is at its optimal capital structure will decrease the costs of both debt and equity financing.
• E) In general, a firm with low operating leverage also has a small proportion of its total costs in the form of fixed costs.

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Definitions:

Homosexuality

The romantic or sexual attraction or behavior between members of the same sex or gender.

Ingroup Favoritism

Preferential treatment of, or more favorable attitudes toward, people in one’s own group.

Human Resources

The department within a business that deals with hiring, administration, and training of personnel.

New York

A state in the northeastern U.S., known for its significant cultural, financial, and media influence globally, with its most populous city sharing the same name.