Which Statement About WACC Is True

question 21

Multiple Choice

Which statement about WACC is true?

• A)A change in a company's target capital structure cannot affect its WACC.
• B)WACC calculations should be based on the before-tax costs of all the individual capital components.
• C)Flotation costs associated with issuing new common stock normally reduce the WACC.
• D)If a company's tax rate increases, then, all else equal, its WACC will decline.

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Definitions:

Weighted Average

An average where each quantity to be averaged is assigned a weight, reflecting its importance.

Continuous Random

A variable that can take an infinite number of values within a given range, where the outcomes cannot be counted and can only be described using intervals on the real number line.

Weight

A measure of the heaviness of an object, often quantified using units such as pounds or kilograms.

Nature Of The Object

The term 'Nature Of The Object' refers to the inherent qualities, characteristics, and properties that define a particular object.