Which of the Following Statements Is Correct

question 27

Multiple Choice

Which of the following statements is correct?

• A) If corporate tax rates were decreased while other things were held constant, and if the Modigliani-Miller tax-adjusted trade-off theory of capital structure were correct, this would tend to cause corporations to decrease their use of debt.
• B) A change in the personal tax rate should not affect firms' capital structure decisions.
• C) "Business risk" is differentiated from "financial risk" by the fact that financial risk reflects only the use of debt, while business risk reflects both the use of debt and such factors as sales variability, cost variability, and operating leverage.
• D) The optimal capital structure is the one that simultaneously (1) maximizes the price of the firm's stock, (2) minimizes its WACC, and (3) maximizes its EPS.

---

Definitions:

Unpolluted Rainwater

Unpolluted rainwater refers to rain that has not been contaminated by pollutants, making it relatively pure compared with rainwater in areas with high levels of pollution.

Disappearing Forests

Disappearing forests refer to the loss of forested areas around the globe due to deforestation, logging, and land conversion, posing major concerns for biodiversity, climate, and indigenous communities.

Biodiversity Data

Information related to the variety and variability of life forms, including species diversity, ecosystem diversity, and genetic diversity.

Ecoregions

Specific geographic areas that contain distinct collections of natural communities and species, with similar environmental conditions.