Which of the following statements is CORRECT?
A. Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce its WACC.
B. Increasing a company's debt ratio will typically reduce the marginal cost of both debt and equity financing. However, this action still may raise the company's WACC.
C. Increasing a company's debt ratio will typically increase the marginal cost of both debt and equity financing. However, this action still may lower the company's WACC.
D. Since a firm's beta coefficient it not affected by its use of financial leverage, leverage does not affect the cost of equity.
E. Since debt financing raises the firm's financial risk, increasing a company's debt ratio will always increase its WACC.
Answer: C
You might also like to view...
In the Excel Solver parameters window, the cell reference for the objective function is an input into which of the following fields?
A. Set Objective B. By Changing Variable Cells C. Subject to Constraints D. Select a Solving Method
Needs such as accomplishment and relaxation, which are unrelated to what others think or do, are known as
A. social needs. B. physiological needs. C. personal needs. D. biological needs. E. safety needs.
A company issued 70 shares of $30 par value preferred stock for $4,000 cash. The journal entry to record the issuance is:
A. Debit Preferred Stock $2,100, debit Investment in Preferred Stock $1,900; credit Cash $4,000. B. Debit Cash $2,100; credit Preferred Stock $2,100. C. Debit Cash $4,000; credit Paid-in Capital in Excess of Par Value, Preferred Stock $1,900, credit Preferred Stock $2,100. D. Debit Cash $4,000; credit Preferred Stock $4,000. E. Debit Investment in Preferred Stock $2,100; credit Cash $2,100.
The two types of discrimination recognized by law are valuation discrimination and access discrimination.
Answer the following statement true (T) or false (F)