Which of the Following Statements Is CORRECT

question 9

Multiple Choice

Which of the following statements is CORRECT?

• A) The percentage flotation cost associated with issuing new common equity is typically smaller than the flotation cost for new debt.
• B) The WACC as used in capital budgeting is an estimate of the cost of all the capital a company has raised to acquire its assets.
• C) There is an "opportunity cost" associated with using reinvested earnings, hence they are not "free."
• D) The WACC as used in capital budgeting would be simply the after-tax cost of debt if the firm plans to use only debt to finance its capital budget during the coming year.
• E) The WACC as used in capital budgeting is an estimate of a company's before-tax cost of capital.

---

Definitions:

Provincial Legislation

Laws and regulations enacted by the legislative bodies of provinces or states within a country.

Unregistered Partnership

A business partnership not formally registered with state or local authorities, still subject to partnership laws but without certain legal benefits.

Contributory Negligence

A legal defense where the plaintiff's own negligence played a role in the harm they suffered, potentially reducing the defendant's liability.

Limited Liability Partnerships

A form of partnership in which some or all partners have limited liabilities, protecting individual partners' personal assets from business debts and liabilities.