单选题 Assuming a firm does not currently have excessive debt, a decrease in leverage will most likely cause the firm's stock price to:

A、

A. increase.
B、

B. remain the same.
C、

C. decrease.

【正确答案】 C

【答案解析】The firm's stock price will most likely fall for two reasons: 1) loss of the debt tax shelter; 2) decrease in the leverage multiplier, A/E, causing ROE to decline.