Which of the Following Statements Is Most Correct

question 25

Multiple Choice

Which of the following statements is most correct?

• A)All component costs in a firm's weighted average cost of capital must reflect after-tax costs,but the only component that requires an adjustment for taxes is the cost of new common stock.
• B)An increase in the corporate tax rate would lower the weighted average cost of capital for the firm,other things held constant.
• C)The cost of debt is equal to one minus the marginal tax rate multiplied by the coupon rate on outstanding debt.
• D)All the above statements are equally true.

---

Definitions:

Monopoly Power

Monopoly power refers to the ability of a single firm or entity to control or dominate an entire market, setting prices and output levels without competition.

Illegal Lobbying

Lobbying activities that violate laws or regulations, often involving corruption or undue influence on government officials.

Antitrust Violation

An action or conduct that undermines the competitive process, including practices deemed unlawful under antitrust laws, such as monopolization, cartels, and mergers that reduce competition.

Price-fixing

An agreement among competitors to raise, fix, or otherwise maintain the price at which their goods or services are sold, not allowing market forces to determine prices.