Which of the Following Statements Is CORRECT

question 73

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 after-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:

Enterprise

A business or company that engages in commercial, industrial, or professional activities.

Sells Goods

Describes the action or process where a business entity offers physical products to consumers in exchange for payment.

Retailer

A business that sells goods directly to consumers, typically in small quantities.

Net Income

The total earnings or profit of a company after subtracting all expenses, including taxes and operating expenses, from its total revenue.