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Which of the given statements is right?

a. A firm can utilize retained earnings devoid of paying a flotation cost. Thus, while the cost of retained earnings is not zero, its cost is usually lower than the after-tax cost of debt.

b. The capital structure which minimizes a firm's weighted average cost of capital is as well the capital structure which maximizes its stock price.

c. The capital structure which minimizes the firm's weighted average cost of capital is as well the capital structure which maximizes its earnings per share.

d. If a firm finds that the cost of debt is less than the cost of equity, increasing its debt ratio should decrease its WACC.

e. Other things held constant, if corporate tax rates declined, and then the Modigliani-Miller tax-adjusted tradeoff theory would propose that firms must raise their use of debt.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M915788

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