Which of the Following Statements Is CORRECT

question 70

Multiple Choice

Which of the following statements is CORRECT?

• A) In the WACC calculation, we must adjust the cost of preferred stock (the market yield) to reflect the fact that 70% of the dividends received by corporate investors are excluded from their taxable income.
• B) We should use historical measures of the component costs from prior financings that are still outstanding when estimating a company's WACC for capital budgeting purposes.
• C) The cost of new equity (re) could possibly be lower than the cost of retained earnings (rs) if the market risk premium, risk-free rate, and the company's beta all decline by a sufficiently large amount.
• D) Its cost of retained earnings is the rate of return stockholders require on a firm's common stock.
• E) The component cost of preferred stock is expressed as rp(1 - T), because preferred stock dividends are treated as fixed charges, similar to the treatment of interest on debt.

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Definitions:

Intentional Tort

A wrongful act, done on purpose, that causes harm to another person, for which the injured party can seek legal redress.

Trespass

An unlawful act causing injury to the person, property, or rights of another, particularly entering onto land without the owner's permission.

Adverse Events

Unintended and harmful events associated with the use of a medical intervention such as a drug or surgery.

Medical Devices

Instruments, apparatuses, or machines that are used in medical procedures to diagnose, prevent, or treat disease or other conditions.