For a Company Whose Target Capital Structure Calls for 50

question 10

Multiple Choice

For a company whose target capital structure calls for 50% debt and 50% common equity, which of the following statements is correct?

• A) The cost of equity is always equal to or greater than the cost of debt.
• B) The WACC is calculated on a before-tax basis.
• C) The WACC exceeds the cost of equity.
• D) The cost of retained earnings typically exceeds the cost of new common stock.