The effective cost of debt depends on
1) the firm's total assets
2) the firm's tax rate
3) the stated interest rate
A) 1 and 2
B) 1 and 3
C) 2 and 3
D) 1, 2, and 3
Correct Answer:
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Q23: If the marginal cost of capital rises,
Q24: If the dividend growth model is used,
Q25: As a firm increases its use of
Q26: Retained earnings
A) have no cost
B) are the
Q27: The effective cost of debt is reduced
Q29: Debt financing is more risky for firms
Q30: The optimal capital structure involves
A) maximizing the
Q31: The marginal cost of capital rises
1) because
Q32: If equity is negative,
A) debt exceeds total
Q33: In order to maximize the value of
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