Which of the Following Statements Is Most Correct

question 55

Multiple Choice

Which of the following statements is most correct?

• A) Capital components are the types of capital used by firms to raise money. All capital comes from one of three components: long-term debt, preferred stock, and equity.
• B) Preferred stock does not involve any adjustment for flotation cost since the dividend and price are fixed.
• C) The cost of debt used in calculating the WACC is an average of the after-tax cost of new debt and of outstanding debt.
• D) The opportunity cost principle implies that if the firm cannot invest retained earnings and earn at least rs, it should pay these funds to its stockholders and let them invest directly in other assets that do provide this return.
• E) The cost of common stock, rs, is usually less than the cost of preferred stock.

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Definitions:

Gross Domestic Product

The total monetary value of all goods and services produced within a country's borders in a specific time period, serving as a broad measure of economic activity.

Productive Activity

Actions or processes that result in the creation of goods or services which have economic value.

Manufacturing Sector

The segment of the economy that is engaged in the transformation of raw materials into finished products or goods.

Xenophobia

The fear and hatred of foreigners.