Which of the Following Statements Is CORRECT

question 64

Multiple Choice

Which of the following statements is CORRECT?

• A) All else equal, an increase in a company's stock price will increase its marginal cost of reinvested earnings (not newly issued stock), r_s.
• B) All else equal, an increase in a company's stock price will increase its marginal cost of new common equity, r_e.
• C) Since the money is readily available, the after-tax cost of reinvested earnings (not newly issued stock) is usually much lower than the after-tax cost of debt.
• D) 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.
• E) When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are deductible by the paying corporation.

---

Definitions:

Brick-and-mortar Store

A physical retail location that customers can visit to shop as opposed to an online store.

Purchase Online

The act of buying goods or services over the internet, often through e-commerce platforms and websites, using digital transactions.

B2B

Business-to-Business, a model in which businesses provide products or services to other businesses rather than to consumers.

B2C

B2C (Business-to-Consumer) describes the process of selling products and services directly from businesses to the end-users or consumers.