Which of the following is correct? A. All of the answers are correct. ??.A fixed

Question

Which of the following is correct? A. All of the answers are correct. ??.A fixed debt level policy indicates that the firm intends to keep the same dollar amount of debt on the balance sheet going OC.A fixed debt ratio policy indicates that the firm intends to keep the same proportion of debt to assets on the balance sheet into the future. going into the future. D. In calculating the asset cost of capital, we use the after-tax cost of debt only when the firm is following a fixed debt level policy.

Explanation / Answer

A.All of the answers are correct.

A fixed debt level policy indicates that the firm intends to keep the same dollar amount fo debt on the balance sheet going into future.(this statment is correct).

A fixed debt ratio policy indicates that the firm intends to keep the same proportion of debt to assets on the balance sheet going into future (this statement is correct).

In calculating the asset cost of capital, we use the after tax cost of debt only when the firm is following a fixed debt level policy.(this statement is correct).

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