Answer the following statements true (T) or false (F)
1. The cost of equity is greater than the cost of debt and increases with increasing financial leverage, but generally less rapidly than the cost of debt.
2. The cost of equity increases with increasing financial leverage in order to compensate the stockholders for the higher degree of financial risk.
3. As financial leverage increases, the cost of debt initially remains constant and then rises, while the cost of equity always rises.
4. If we assume that EBIT is constant, the value of a firm is maximized by minimizing the weighted average cost of capital.
5. In theory, a firm's optimal capital structure is that which minimized the firm's overall cost of capital resulting in a maximization of the market value of a firm.
1. FALSE
2. TRUE
3. TRUE
4. TRUE
5. TRUE
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a. True b. False Indicate whether the statement is true or false
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Indicate whether the statement is true or false
List the "Big Four" public accounting firms in the United States.
What will be an ideal response?
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Answer the following statement true (T) or false (F)