Which of the Following Statements Is CORRECT

question 50

Multiple Choice

Which of the following statements is CORRECT?

• A) The bond-yield-plus-risk-premium approach to estimating the cost of common equity involves adding a risk premium to the interest rate on the company's own long-term bonds. The size of the risk premium for bonds with different ratings is published daily in The Wall Street Journal.
• B) The WACC is calculated using a before-tax cost for debt that is equal to the interest rate that must be paid on new debt, along with the after-tax costs for common stock and for preferred stock if it is used.
• C) An increase in the risk-free rate is likely to reduce the marginal costs of both debt and equity.
• D) The relevant WACC can change depending on the amount of funds a firm raises during a given year. Moreover, the WACC at each level of funds raised is a weighted average of the marginal costs of each capital component, with the weights based on the firm's target capital structure.

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Nonpathological

Relating to a state that is not indicative of a disease or disorder.

Urobilinogen

A substance formed from the reduction of bilirubin, found in the intestines, and can be excreted in the urine or feces, acting as an indicator of liver function.

Cirrhosis

A chronic liver disease marked by degeneration of liver tissue, often caused by long-term alcohol abuse or hepatitis infection.

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A medical condition characterized by blood pressure that is lower than normal, which can cause symptoms like dizziness and fainting.