Which of the Following Statements Is Correct

question 45

Multiple Choice

Which of the following statements is correct?

• A) We should use historical measures of the component costs from prior financings when estimating a company's WACC for capital budgeting purposes.
• B) The cost of new equity (re) could possibly be lower than the cost of retained earnings (rs) if the market risk premium, risk-free rate, and the company's beta all decline by a sufficiently large amount.
• C) Its cost of retained earnings is the rate of return shareholders require on a firm's common stock.
• D) The component cost of preferred stock is expressed as rp(1 - T), because preferred stock dividends are treated as fixed charges, similar to the treatment of interest on debt.

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Definitions:

Psychogenic Paralysis

A loss of motor function without a physiological cause, arising from psychological factors.

Depression

A mental health disorder characterized by persistent feelings of sadness, hopelessness, and a lack of interest or pleasure in activities, often accompanied by physical symptoms.

Loss Of Appetite

A decrease in the desire to eat, which can be temporary or a symptom of a more serious condition.

Dissociation

A psychological process where a person disconnects from their thoughts, feelings, memories, or sense of identity.