Which of the Following Statements Is Correct

question 8

Multiple Choice

Which of the following statements is correct?

• A)When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible by the paying corporation.
• B)When calculating the cost of preferred stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation.
• C)Because of tax effects, an increase in the risk-free rate will have a greater effect on the after-tax cost of debt than on the cost of common stock.
• D)If a company's beta increases, this will increase the cost of equity used to calculate the WACC, but only if the company does not have enough retained earnings to take care of its equity financing and hence needs to issue new stock.

Understand the evolutionary basis for human emotions like jealousy and promiscuity.

Evaluate the criticisms and limitations of evolutionary psychology.

Apply evolutionary psychology to understand relationship dynamics.

Understand how evolutionary psychology explanations can be applied to real-life situations.

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Definitions:

Retained Earnings

The portion of a company's profits that is kept or retained rather than paid out as dividends to shareholders.

Flotation Costs

Expenses incurred by a company in issuing new securities, including underwriting, legal, and registration fees.

Capital Gains

The profit earned from the sale of assets or investments when the selling price exceeds the purchase price.

CAPM

Capital asset pricing model. A statistical model of the investment world aimed at explaining how required returns are determined in financial markets and thereby how stock prices are set. Also see SML.