Which of the Following Statements Is CORRECT

question 88

Multiple Choice

Which of the following statements is CORRECT?

• A) When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are deductible by the paying corporation.
• B) All else equal, an increase in a company's stock price will increase its marginal cost of retained earnings, rs.
• C) All else equal, an increase in a company's stock price will increase its marginal cost of new common equity, re.
• D) Since the money is readily available, the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt.
• E) If a company's tax rate increases but the YTM on its noncallable bonds remains the same, the after-tax cost of its debt will fall.

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Definitions:

Gymnosperm

Seed plant whose seeds are not enclosed within a fruit; a conifer, cycad, ginkgo, or gnetophyte.

Evergreen

Plants that maintain their green foliage throughout the year, regardless of seasons.

Angiosperms

Plants that bear flowers and generate seeds that are contained within fruits, making up the largest variety of terrestrial plants.

Animal Fertilization

The process by which sperm from a male and ovum from a female combine to form a zygote, leading to the development of a new organism.