Which One of the Following Statements Is Correct,all Else Held

question 72

Multiple Choice

Which one of the following statements is correct,all else held constant?

• A)Beta is used to compute the return on equity and the standard deviation is used to compute the return on preferred.
• B)A decrease in a firm's WACC will increase the attractiveness of the firm's investment options.
• C)The aftertax cost of debt increases when the market price of a bond increases.
• D)If you have both the dividend growth and the security market line's costs of equity, you should use the higher of the two estimates when computing WACC.
• E)WACC is applicable only to firms that issue both common and preferred stock.

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Definitions:

Projected

Refers to estimates or forecasts of future financial outcomes, performance, or trends based on current data and analysis.

Earnings Before Interest

Earnings Before Interest, often abbreviated as EBI, refers to a company's profit before any interest expenses are deducted. It shows the financial performance from operational activities.

CCA Class

Refers to a classification under the Canadian Capital Cost Allowance that groups assets of a similar nature for depreciation purposes.

Net Working Capital

The gap between a business's current resources and its present debts, showcasing its financial stability in the near term.