What does a decrease in the value of a firm's after-tax operating income by the costs associated with both its debt and its equity indicate?

Question

Quizplus · Accepted Answer

The decrease in after-tax operating income by the costs associated with both debt and equity will lead to a reduction in the firm's economic value. This means that the firm is generating lower returns on its investments and is less valuable to investors. It is not related to the price earnings ratio, expected capital gains yield, intrinsic value, or nonconstant growth of the stock.

What Does a Decrease in the Value of a Firm's