Which of the Following Statements Is Correct

question 44

Multiple Choice

Which of the following statements is correct?

• A)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.
• B)The capital structure that minimizes a firm's weighted average cost of capital is also the capital structure that maximizes its stock price.
• C)The capital structure that minimizes the firm's weighted average cost of capital is also the capital structure that maximizes its earnings per share.
• D)If a firm finds that the cost of debt is less than the cost of equity, increasing its debt ratio must reduce its WACC.

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Definitions:

Repetitive Tasks

Activities or duties that are performed in the same manner and sequence, requiring minimal mental effort due to their repetitive nature.

Normative Model

A theoretical framework that outlines ideal standards or behaviors in specific situations, often used to guide decision-making.

Commitment Importance

Commitment Importance refers to the significance of dedication and loyalty from individuals or groups towards tasks, goals, or organizations, impacting success and stability.

Contingency Theories

A theory in organizational studies that suggests the effectiveness of a leader is contingent upon the fit between the leader's behavior and specific situational factors.