Which of the Following Statements Is CORRECT

question 36

Multiple Choice

Which of the following statements is CORRECT?

• A) The capital structure that maximizes the stock price is generally the capital structure that also maximizes earnings per share.
• B) All else equal, an increase in the corporate tax rate would tend to encourage a company to increase its debt ratio.
• C) Since debt financing raises the firm's financial risk, increasing a company's debt ratio will always increase its WACC.
• D) Since debt is cheaper than equity, increasing a company's debt ratio will always reduce its WACC.
• E) When a company increases its debt ratio, the costs of equity and debt both increase.Therefore, the WACC must also increase.

---

Definitions:

Primary Visual Cortex

The region of the brain located in the occipital lobe that processes visual information from the eyes, playing a fundamental role in visual perception.

Medulla

A part of the brainstem that controls vital body functions such as heart rate, breathing, and blood pressure.

Corpus Callosum

The large band of neural fibers connecting the two hemispheres of the brain, facilitating interhemispheric communication.

Pons

A part of the brainstem that plays a key role in controlling arousal, sleep, breathing, and relaying sensory information between the cerebrum and cerebellum.