Which of the Following Statements Is Most Correct

question 52

Multiple Choice

Which of the following statements is most correct?

• A) In the weighted average cost of capital calculation, we must adjust the cost of preferred stock for the tax exclusion of 70 percent of dividend income.
• B) We ideally would like to use historical measures of the component costs from prior financings in estimating the appropriate weighted average cost of capital.
• C) The cost of common stock (rs) will increase if the market risk premium and risk-free rate decline by a substantial amount.
• D) Statements b and c are correct.
• E) None of the statements above is correct.