Which of the Following Statements Is CORRECT

question 88

Multiple Choice

Which of the following statements is CORRECT?

• A) When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are deductible by the paying corporation.
• B) All else equal, an increase in a company's stock price will increase its marginal cost of retained earnings, rs.
• C) All else equal, an increase in a company's stock price will increase its marginal cost of new common equity, re.
• D) Since the money is readily available, the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt.
• E) If a company's tax rate increases but the YTM on its noncallable bonds remains the same, the after-tax cost of its debt will fall.

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Definitions:

Vertical Integration

A strategy where a company expands its operations into different stages of production or distribution within the same industry.

Consolidated Cash Account

A combined account that aggregates the cash balances of a parent company and its subsidiaries to give a total cash figure in consolidated financial statements.

Business Combination

The process of merging or acquiring another company to expand operations, enter new markets, or acquire new technologies.