Which of the Following Statements Is CORRECT

question 7

Multiple Choice

Which of the following statements is CORRECT?

• A) When calculating the cost of preferred stock,a company needs to adjust for taxes,because preferred stock dividends are deductible by the paying corporation.
• B) All else equal,an increase in a company's stock price will increase its marginal cost of retained earnings,r_s.
• C) All else equal,an increase in a company's stock price will increase its marginal cost of new common equity,r_e.
• D) Since the money is readily available,the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt.
• E) If a company's tax rate increases but the YTM on its noncallable bonds remains the same,the after-tax cost of its debt will fall.

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Definitions:

Physical Response

The body's natural reaction to stimuli, which can include anything from stress responses to motor actions in response to environmental changes.

Organizational Distress

A state in which a company or organization experiences a significant decrease in performance, health, or vitality, often due to mismanagement, external pressures, or internal conflicts.

Participation Problems

Issues or challenges associated with involving individuals or groups effectively in decision-making processes within an organization.

Performance Decrement

A cost resulting from poor quality or low quantity of production, grievances, and unscheduled machine downtime and repair.