Which One of the Following Statements Is Correct Concerning the Weighted

question 267

Multiple Choice

Which one of the following statements is correct concerning the weighted average cost of capital (WACC) ?

• A) The pre-tax rate of return on the debt is the rate that is relevant to the computation of the WACC.
• B) When computing the WACC, the weight assigned to the preferred stock is equal to the coupon rate multiplied by the par value assigned to the preferred stock.
• C) A firm's WACC will decrease as their corporate tax rate decreases.
• D) The weight of the common stock used in the computation of the WACC is based on the number of shares outstanding multiplied by the book value per share.
• E) The weight of the debt can be based on the face value of the bond issue(s) outstanding multiplied by the quoted price(s) when expressed as a percentage of the face value.

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Definitions:

Precognition

The purported psychic ability to see or know about events before they happen.

Precognition

The ability or claimed ability to see or know about events before they happen, often regarded as a psychic phenomenon.

Clairvoyance

The alleged skill of obtaining insights about a thing, individual, place, or physical occurrence without using the five common senses, instead relying on extrasensory perception.

Telepathy

The purported transmission of information from one person to another without using any known human sensory channels or physical interaction.