Which of the Following Statements Is Correct

question 5

Multiple Choice

Which of the following statements is correct?

• A) Suppose a firm is losing money and thus, is not paying taxes, and that this situation is expected to persist for a few years whether or not the firm uses debt financing.Then the firm's after-tax cost of debt will equal its before-tax cost of debt.
• B) The component cost of preference shares is expressed as rps(1 - T), because preference share dividends are treated as fixed charges, similar to the treatment of debt interest.
• C) The reason that a cost of capital is assigned to retained earnings is because these funds are already earning a return in the business, the reason does not involve the opportunity cost principle.
• D) The bond-yield-plus-risk-premium approach to estimating a firm's cost of ordinary equity involves adding a subjectively determined risk-premium to the market risk-free bond rate.
• E) None of the above is a correct statement.

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Definitions:

Antisocial Behavior

Actions that harm or lack consideration for the well-being of others, often violating social norms and laws.

Gene Expression

The process by which the genetic instructions are used to synthesize gene products (such as proteins), influencing cell function and structure.

Environmental Factors

External elements, including physical, social, and cultural influences, that can affect an individual's health and behavior.

Intermittent Explosive Disorder

A mental disorder characterized by repeated sudden episodes of impulsive, aggressive, violent behavior or angry verbal outbursts.