Which of the Following Statements Is NOT Correct Regarding the Equity

question 52

Multiple Choice

Which of the following statements is NOT correct regarding the equity portion of the WACC?

• A)Preferred equity is separate from common equity
• B)Market values rather than book values should be used
• C)Retained earnings is not included
• D)Both equity and debt have a tax shield

---

Definitions:

Prices of Capital

Prices of capital refer to the cost of acquiring, maintaining, and using productive assets such as buildings, machinery, and equipment for producing goods or services.

Prices of Labor

Generally refers to the wages received by workers for their labor, determined by the supply and demand for labor in the market.

Isocost Line

A graphical representation showing all possible combinations of inputs that can be purchased with a given total cost.

Slope

In mathematics and economics, this term refers to the steepness of a line on a graph, indicating the rate of change between variables represented on the axes.