Which of the Following Statements Is Most Correct

question 57

Multiple Choice

Which of the following statements is most correct?

• A) One purpose of calculating the WACC is to have a singular cost of capital measure that can be applied to evaluate all of the firm's projects,including those of greater than and lesser than average risks.
• B) A firm facing a steep demand curve (that is,high flotation costs)for new equity would likely also face,at some point,a steeply upward sloping WACC curve.
• C) A breakpoint is based on the dollar value used of a specific type of capital,and occurs at the point where the cost of that capital type increases.Thus,if a firm has $100,000 in earnings,and stockholders want $50,000 of those earnings paid as dividends,then retained earnings will have two breakpoints.
• D) Answers a and b are both correct.
• E) All of the above are false.

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