Which of the Following Statements Is Correct

question 8

Multiple Choice

Which of the following statements is correct?

• A)When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible by the paying corporation.
• B)When calculating the cost of preferred stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation.
• C)Because of tax effects, an increase in the risk-free rate will have a greater effect on the after-tax cost of debt than on the cost of common stock.
• D)If a company's beta increases, this will increase the cost of equity used to calculate the WACC, but only if the company does not have enough retained earnings to take care of its equity financing and hence needs to issue new stock.

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Definitions:

Rapport

The ability to find common ground with another person based on respect, empathy, and trust.

Diverse Range

A broad spectrum or variety of different types, categories, or options available within a certain context.

Aggressive Communication

A style of communication where an individual expresses their needs, wants, or feelings in a forceful, hostile, or dominating way, often at the expense of others.

Assertive Communication

Expressing oneself in a direct and civil manner.