Quiz Ch 14 – T/F WACC Curve Shape and Dividend Stability: Firm U and Firm V Comparison

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition

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True or false: Assuming a curve depicting Firm U's WACC against its debt ratio resembles a shallow "U," and Firm V's curve resembles a sharp "V," both firms having debt ratios that minimize their WACCs, and with other factors remaining constant, it would be simpler for Firm V than for Firm U to sustain a consistent dividend amidst fluctuating investment prospects and yearly earnings.

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