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.
E. Other things held constant, if corporate tax rates declined, then the Modigliani-Miller tax-adjusted theory would suggest that firms should increase their use of debt.
Answer: B
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A. high; high B. high; low C. low; high D. low; low E. low; medium
Beth is an accountant with Consumer Sales Corporation. Doral buys Consumer stock and loses money on the investment. To recover from Beth under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Doral must prove
A. none of the choices. B. fraud and reliance only. C. fraud, reliance, and materiality only. D. scienter, fraud, reliance, materiality, and causation only.
Kali contracts to sell Leony her car for $3,000. This contract will be fully discharged when Kali and Leony
a. agree to sign a bill of sale. b. exchange the car for the $3,000. c. sign a receipt. d. shake hands and go their separate ways.
A businessevent data store is also known as a transaction file.
Answer the following statement true (T) or false (F)