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If Demand Is Very Inelastic

question 22

Multiple Choice

If demand is very inelastic,

Definitions:

Optimal Capital Structure

The optimal combination of equity and debt financing that reduces the firm's capital costs to the minimum while maximizing its value.

Maximizes Value

Maximizes Value refers to the financial management principle where decisions are made to increase the worth of a company or asset to its shareholders or owners.

Financial Distress Costs

Expenses incurred by a company when it is struggling to meet its financial obligations, which may include bankruptcy costs, restructuring costs, and inefficiencies.

Financial Leverage

Leveraging borrowed capital to enhance the expected returns of an investment, thereby also magnifying the potential for loss.