Which of the Following Statements Is CORRECT

question 66

Multiple Choice

Which of the following statements is CORRECT?

• A) The WACC as used in capital budgeting is an estimate of a company's before-tax cost of capital.
• B) The percentage flotation cost associated with issuing new common equity is typically smaller than the flotation cost for new debt.
• C) 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.
• D) There is an "opportunity cost" associated with using retained earnings,hence they are not "free."
• E) The WACC as used in capital budgeting would be simply the before-tax cost of debt if the firm plans to use only debt to finance its capital budget during the coming year.

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Definitions:

Express Authority

Specific powers given by a principal to an agent for particular tasks or activities.

Specifically Outlined

Described or detailed in a clear and explicit manner, leaving no room for ambiguity.

Acts

Formal decisions, laws, or statutes enacted by a government's legislative body.

Agency Coupled

A principal-agent relationship that cannot be terminated at will by the principal because it includes an interest beneficial to the agent.