Which of the Following Statements Is Correct

question 53

Multiple Choice

Which of the following statements is correct?

• A)The capital structure that maximizes the common share price is also the capital structure that minimizes the WACC.
• B)The capital structure that maximizes the common share price is also the capital structure that maximizes earnings per share.
• C)Increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing; however, this still may raise the company's WACC.
• D)Increasing personal tax rate but decreasing corporate tax rate would encourage companies to increase their debt ratios.

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Definitions:

Dissociated Limited Partner

A person who has ceased to be involved in a limited partnership either through withdrawal, expulsion, or another mechanism outlined in the partnership agreement.

Management Powers

Refers to the authority given to managers or directors of a corporation or organization to make significant decisions in the day-to-day operations.

Limited Liability

A legal principle that shields an investor's personal assets from the debts and liabilities of the company, limiting loss to the amount invested.

Certificate of Limited Partnership

A legal document filed with a state governmental body that establishes the existence of a limited partnership.