Which of the Following Statements Is Most Correct

question 48

Multiple Choice

Which of the following statements is most correct?

• A) One purpose of calculating the WACC is to have a singular cost of capital measure that can be applied to evaluate all of the firm's projects, including those of greater than and lesser than average risks.
• B) A firm facing a steep demand curve (that is, high flotation costs) for new equity would likely also face, at some point, a steeply upward sloping WACC curve.
• C) A breakpoint is based on the rand value used of a specific type of capital, and occurs at the point where the cost of that capital type increases.Thus, if a firm has R100,000 in earnings, and shareholders want R50,000 of those earnings paid as dividends, then retained earnings will have two breakpoints.
• D) Answers a and b are both correct.
• E) All of the above are false.

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Definitions:

UCC

Known as the Uniform Commercial Code, this significant body of law sets the standards for commercial transactions throughout the United States.

Uniform

Consistently the same in character or degree; in legal contexts, it often refers to laws that are the same across all jurisdictions within a certain area.

Preincorporation Contract

Agreements entered into on behalf of a corporation not yet formally established, often by its founders or promoters.

Fourteenth Amendment

The Fourteenth Amendment to the United States Constitution grants citizenship to all persons born or naturalized in the U.S. and guarantees all citizens equal protection of the laws, significantly impacting civil rights.