Which of the Following Is True Regarding the Weighted-Average Cost

question 14

Multiple Choice

Which of the following is true regarding the weighted-average cost of capital?

• A) A company may have two weighted-average costs of capital if the firm's capital structure is so large that new common stock must be sold.
• B) The book value of the components of capital should always be used to calculate the weighted-average cost of capital.
• C) The cost of common equity is lower than the cost of retained earnings.
• D) The cost of preferred stock is adjusted for the tax deduction associated with preferred dividends.

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