Which One of the Following Is a Correct Statement Concerning

question 189

Multiple Choice

Which one of the following is a correct statement concerning the weighted average cost of capital?

• A) Preferred stock is generally the cheapest form of external financing.
• B) An increase in interest rates by the Bank of Canada generally has no effect on a firm's cost of capital.
• C) The use of debt generally lowers a firm's cost of capital, at least initially.
• D) Taxes help lower the cost of debt and preferred stock financing.
• E) The weighted average cost of capital remains constant for a firm over time.

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Definitions:

Loss Figures

Financial metrics indicating the amount of money a business has lost over a specific period.

Reportable Segment

A distinct business segment of a company that can generate its own revenues and expenses and whose operating results are regularly reviewed by the company's management.

Operating Segment

A component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, including segments with intersegment revenues.

Revenue Test

A criterion used to determine the significance of a segment or component of a business by comparing its revenue to a set percentage of the total revenue of the entire entity.