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.

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Definitions:

Share Valuation Models

Techniques or methods used to estimate the fair value of a company's shares, such as the Dividend Discount Model or the Discounted Cash Flow method.