Which of the Following Statements Is Correct

question 22

Multiple Choice

Which of the following statements is correct?

• A)The cost of capital used to evaluate a project should be the cost of the specific type of financing used to fund that project.
• B)The cost of debt used to calculate the weighted average cost of capital is based on an average of the cost of debt already issued by the firm and the cost of new debt.
• C)One problem with the CAPM approach to estimating the cost of equity capital is that if a firm's stockholders are, in fact, not well diversified, beta might be a poor measure of the firm's true investment risk.
• D)The bond-yield-plus-risk-premium approach is the most sophisticated and objective method of estimating a firm's cost of equity capital.
• E)The cost of equity capital is generally easier to measure than the cost of debt, which varies daily with interest rates, or the cost of preferred stock which is issued infrequently.

---

Definitions:

Monetary Damage

Financial compensation awarded in response to a loss or injury suffered by an individual or entity, often determined through legal proceedings.

Normal Accidents

Refers to the concept that in complex systems, accidents are inevitable due to the complexity and interdependence of system components.

Genetic Pollution

The uncontrolled spread of genetically modified or non-native genes into wild populations, potentially threatening biodiversity and ecosystem stability.

Surface Air Temperature

The temperature of the air near the Earth's surface, which is a critical indicator of climate change and environmental conditions.