Which One of the Following Statements Is Correct for a Firm

question 57

Multiple Choice

Which one of the following statements is correct for a firm that uses debt in its capital structure?

• A)The WACC should decrease as the firm's debt-equity ratio increases.
• B)When computing the WACC, the weight assigned to the preferred stock is based on the coupon rate multiplied by the par value of the preferred.
• C)The firm's WACC will decrease as the 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 WACC will remain constant unless a firm retires some of its debt.

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