If a Company's Weighted Average Cost of Capital Is Less

question 10

Multiple Choice

If a company's weighted average cost of capital is less than the required return on equity, then the firm:

• A) Is financed with more than 50% debt.
• B) Is perceived to be safe
• C) Has debt in its capital structure
• D) Must have preferred stock in its capital structure

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Definitions:

Original Fishbein Model

An attitude model suggesting that an individual's attitude towards an object is a function of their beliefs about and evaluation of several of its attributes.

Descriptive Norm

Norms that convey information about what is commonly done in specific situations.

Immediate Setting

The direct physical environment surrounding an individual at any given time, which can influence behavior and perception.

Injunctive Norm

Social norms that dictate what is perceived as approved or disapproved behavior within a society or group.