Which of the Following Statements Is CORRECT

question 6

Multiple Choice

Which of the following statements is CORRECT?

• A) The capital structure that minimizes a firm's weighted average cost of capital is also the capital structure that maximizes its stock price.
• B) The capital structure that minimizes the firm's weighted average cost of capital is also the capital structure that maximizes its earnings per share.
• C) If a firm finds that the cost of debt is less than the cost of equity, increasing its debt ratio must reduce its WACC.
• D) Other things held constant, if corporate tax rates declined, then the Modigliani-Miller tax-adjusted tradeoff theory would suggest that firms should increase their use of debt.
• E) A firm can use retained earnings without paying a flotation cost.Therefore, while the cost of retained earnings is not zero, its cost is generally lower than the after-tax cost of debt.

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Definitions:

Explore Key Issues

The process of examining important matters or problems in detail to understand or resolve them.

Create Appropriate Goals

The process of setting relevant, specific, and attainable objectives that align with both individual aspirations and organizational or project needs.

Action Program

An Action Program is a detailed plan outlining steps, strategies, and resources required to achieve specific goals or objectives.

Therapeutic Climate

The environment or atmosphere created within therapy sessions that fosters openness, safety, and support for the client’s healing process.