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.

---

Definitions:

Union Promises

Assurances or commitments given by labor unions to their members or potential members about achieving certain goals or benefits through collective action.

Organizing Strategies

Various plans and methods used by organizations, such as unions, to mobilize and recruit members or supporters to achieve their objectives.

Members-only Representation

A labor representation model where union services and benefits are provided exclusively to members of the union rather than all employees in a bargaining unit.

Card-check Agreements

A method for workers to organize into a union wherein if a majority of employees sign authorization cards expressing their wish to unionize, the employer may recognize the union without a formal election.