Which of the Following Statements Is Most Correct

question 34

Multiple Choice

Which of the following statements is most correct?

• A) Since stockholders do not generally pay corporate taxes, corporations should focus on before-tax cash flows when calculating the weighted average cost of capital (WACC).
• B) When calculating the weighted average cost of capital, firms should include the cost of accounts payable.
• C) When calculating the weighted average cost of capital, firms should rely on historical costs rather than marginal costs of capital.
• D) Answers a and b are correct.
• E) None of the answers above is correct.

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Definitions:

Fines

Penalties of monetary payment imposed by a court on a person or organization as punishment for an offense.

Imprisonment

The act of confining someone in a prison as a punishment for committing a crime.

Accountant-client Privilege

A legal privilege that keeps communications between an accountant and their client confidential, similar to attorney-client privilege.

Common Law

The body of law derived from judicial decisions and customs, as opposed to statutes or written laws enacted by legislative bodies.