Which One of the Following Will Affect the Capital Structure

question 34

Multiple Choice

Which one of the following will affect the capital structure weights used to compute a firm's weighted average cost of capital?

• A)decrease in a firm's tax rate
• B)increase in the market risk premium
• C)increase in the market value of the firm's ordinary shares
• D)increase in the firm's beta
• E)decrease in the book value of a firm's equity

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Definitions:

Total Cost

The sum of all expenses incurred in the production of goods or services, including both fixed and variable costs.

Accounting Profit

The difference between total revenue and explicit costs of a business.

Economic Profit

The profit a company makes after deducting both explicit and implicit costs, reflecting the total opportunity costs of its resources.

Implicit Costs

The opportunity costs of using resources that are owned by the firm or entrepreneur for one purpose instead of another, not directly paid out in cash.