Which one of the following statements is CORRECT? Group of answer choices The capital structure...
50.1K
Verified Solution
Link Copied!
Question
Finance
Which one of the following statements is CORRECT?
Group of answer choices The capital structure that minimizes the firm's weighted average cost of capital is also the capital structure that maximizes its earnings per share. If a firm finds that the cost of debt is less than the cost of equity, increasing its debt ratio must reduce its WACC. 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. The capital structure that maximizes a firm's weighted average cost of capital is also the capital structure that maximizes its stock price.
Other things held constant, if corporate tax rates increased, then the Modigliani-Miller tax-adjusted tradeoff theory would suggest that firms should increase their use of debt.
Which one of the following statements is CORRECT?
Group of answer choices
The capital structure that minimizes the firm's weighted average cost of capital is also the capital structure that maximizes its earnings per share.
If a firm finds that the cost of debt is less than the cost of equity, increasing its debt ratio must reduce its WACC.
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.
The capital structure that maximizes a firm's weighted average cost of capital is also the capital structure that maximizes its stock price.
Other things held constant, if corporate tax rates increased, then the Modigliani-Miller tax-adjusted tradeoff theory would suggest that firms should increase their use of debt.
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Best
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.