Which statement below is incorrect:

Multiple Choice

• All else equal, an increase in the debt-to-equity ratio will increase the firms leverage and increase the sustainable growth rate.

• Hard capital rationing occurs when a company experiences financial distress

• Free cash flow equals fixed costs plus the contribution margin multiplied by the number of units sold.

• Cost of debt is the return the firms creditors demand on new borrowing

• The principal amount of a bond that is repaid at the end of the term is called the par value.