Which of the Following Statements Is CORRECT

question 20

Multiple Choice

Which of the following statements is CORRECT?

• A) Since debt financing raises the firm's financial risk,increasing the target debt ratio will always increase the WACC.
• B) Since debt financing is cheaper than equity financing,raising a company's debt ratio will always reduce its WACC.
• C) Increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing.However,this action still may raise the company's WACC.
• D) Increasing a company's debt ratio will typically increase the marginal costs of both debt and equity financing.However,this action still may lower the company's WACC.
• E) Since a firm's beta coefficient is not affected by its use of financial leverage,leverage does not affect the cost of equity.

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Definitions:

Hot Flashes

A common symptom of the menopause transition characterized by sudden, transient sensations of warmth, often accompanied by sweating and flushing of the skin.

Night Sweats

Excessive sweating during sleep, not related to an overheated environment, often a symptom of various medical conditions or hormonal changes.

Perimenopausal Period

The transition phase before menopause, when the menstrual cycle becomes irregular and symptoms of menopause begin to appear.

Mood Changes

Variations in one's emotional state, which can be influenced by various factors including stress, hormonal shifts, and mental health conditions.