Which of the Following Statements Is CORRECT

question 58

Multiple Choice

Which of the following statements is CORRECT?

• A) A change in a company's target capital structure cannot affect its WACC.
• B) WACC calculations should be based on the before-tax costs of all the individual capital components.
• C) Flotation costs associated with issuing new common stock normally reduce the WACC.
• D) If a company's tax rate increases,then,all else equal,its weighted average cost of capital will decline.
• E) An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.

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Definitions:

Work-In-Process

Items that are in the stage of production but are not yet complete, representing a cost that includes materials, labor, and overhead.

Finished Goods

Items that have finished being manufactured and are prepared to be offered to consumers.

Manufacturing Cost

The total expense involved in the production of goods, including labor, materials, and overhead costs.

Finished Goods Inventory

The portion of inventory that has completed the production process and is ready for sale.