All Else Constant,the Weighted Average Cost of Capital for a Risky,levered

question 6

Multiple Choice

All else constant,the weighted average cost of capital for a risky,levered firm will decrease if:

• A)the dividend yield on the ordinary shares increases
• B)corporate taxes are eliminated
• C)the firm replaces some of its debt with preferred shares
• D)the firm's bonds start selling at a premium rather than at a discount
• E)the market risk premium increases

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Definitions:

Maximize

To increase to the greatest possible amount or degree or to achieve the highest possible outcome in a given situation.

Total Benefits

Total benefits refer to the complete range of economic, social, and personal advantages gained from an action or an investment.

Consumer Surplus

The difference between the highest price a consumer is willing to pay and the actual price they pay in the market.

Market Demand

The total amount of a product or service that consumers in a market are willing and able to purchase at a given price level in a given time period.