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:

Carcinoma Lesion

A malignant lesion or tumor that arises from epithelial cells, often found in the skin or lining of internal organs.

Prostate-specific Antigen

A protein produced by the prostate gland, elevated levels of which can indicate prostate cancer or other prostate disorders.

Transrectal Ultrasound

An imaging test using sound waves to create pictures of the prostate gland and surrounding tissues, performed by inserting a probe into the rectum.

Prostate Biopsy

A procedure where small samples of the prostate gland are removed to be examined under a microscope for cancer or other conditions.