Which of the Following Is Most Correct

question 88

Multiple Choice

Which of the following is most correct?

• A) When comparing two firms within the same industry, most analysts calculate the weighted average cost of capital on a before-tax basis to facilitate comparisons.
• B) Firms should use historical costs rather than marginal costs of capital.
• C) An increase in the risk-free rate will increase the cost of equity.
• D) All of these choices are correct.

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Definitions:

Competitive Market

A market structure characterized by a large number of buyers and sellers, where no single entity controls the market price.

Marginal Cost

Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. It's pivotal in decision-making processes regarding increasing or decreasing production.

Marginal Revenue

The extra financial gain from selling an additional unit of a product or service.

Profit

The profit earned when the revenue generated from a business operation surpasses all its associated expenses, costs, and taxes required for the operation.