Which of the Following Statements Is Correct

question 70

Multiple Choice

Which of the following statements is correct?

• A)The WACC is calculated using before-tax costs for all components.
• B)The after-tax cost of debt usually exceeds the after-tax cost of equity.
• C)Retained earnings that were generated in the past and are reflected on the firm's balance sheet are generally available to finance the firm's capital budget during the coming year.
• D)The WACC that should be used in capital budgeting is the firm's marginal, after-tax cost of capital.

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Definitions:

Fixed Assets

Assets of a long-lasting nature involved in business operations, which are not anticipated to be expended or turned into cash quickly.

Current Assets

Items of value that are projected to be turned into cash, sold off, or consumed either within a year or throughout the length of the business's normal operational cycle, whichever timeframe is greater.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating its ability to meet short-term obligations.

Office Equipment

Refers to the assets purchased for use in the operation of a business, including computers, printers, and furniture.