Which One of the Following Statements Is Correct

question 20

Multiple Choice

Which one of the following statements is correct?

• A)An increase in the market value of preferred stock will increase a firm's weighted average cost of capital.
• B)The cost of preferred stock is unaffected by the issuer's tax rate.
• C)Preferred stock is generally the cheapest source of capital for a firm.
• D)The cost of preferred stock remains constant from year to year.
• E)Preferred stock is valued using the capital asset pricing model.

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Definitions:

Integer-Multiple

A value that is an integral (whole) number times of a particular number, indicating a multiplicative relationship.

Fixed Cost

Expenses that do not change with the level of goods or services produced by the business, such as rent for a building.

Managerial Levers

Tools or methods used by managers to influence the performance and direction of their organization.

Large Lots

Refers to the practice of bulk buying or producing goods in significant quantities to achieve economies of scale.