With Respect to Issues Related to the Cost of Capital

question 93

Multiple Choice

With respect to issues related to the cost of capital:

• A)An increase in the debt ratio will result in greater risk for debt holders but not equity holders
• B)The cost of capital is the return a firm must earn before tax to satisfy security holders
• C)The WACC is the correct discount rate for average-risk projects
• D)The expected return on equity is relevant to capital budgeting decisions

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