Which Is Not True About Debt Financing and the Weighted

question 51

Multiple Choice

Which is not true about debt financing and the weighted average cost of capital?

• A) Debt is usually the cheapest source of financing.
• B) As the level of debt increases beyond the optimum capital structure, the cost of capital increases.
• C) No debt in the firm's capital structure will minimize the firm's weighted-average cost of capital.
• D) None of these.

---

Definitions:

Treasury-bill Rate

The interest rate paid by U.S. Treasury bills, considered a benchmark for risk-free rates in the United States.

Fair Return

The reasonable profit that investors can expect to earn from their investment, considering the risk involved.

Market Signals

Indications or signs derived from market data that can suggest the future direction of market prices.

Sarbanes-Oxley Act

A U.S. federal law enacted in 2002 to protect investors by improving the accuracy and reliability of corporate disclosures.