Which of the Following Statements Is True Concerning Debt That

Multiple Choice

Which of the following statements is true concerning debt that has no risk of default?

A) A company's cost of capital increases as more debt is used in its capital structure.
B) The cost of debt increases as more debt is used in the company's capital structure.
C) The cost of debt increases as more debt is used in the company's capital structure because total risk increases.
D) The cost of equity capital increases with increasing proportions of debt because,although the total amount of risk does not change,risk is concentrated on a proportionately smaller amount of equity capital.