Which of the Following Statements Is CORRECT

question 47

Multiple Choice

Which of the following statements is CORRECT?

• A) We should use historical measures of the component costs from prior financings that are still outstanding when estimating a company's WACC for capital budgeting purposes.
• B) The cost of new equity (r_e)could possibly be lower than the cost of reinvested earnings (r_s)if the market risk premium,risk-free rate,and the company's beta all decline by a sufficiently large amount.
• C) A firm's cost of reinvesting earnings is the rate of return stockholders require on a firm's common stock.
• D) The component cost of preferred stock is expressed as r_p(1 − T),because preferred stock dividends are treated as fixed charges,similar to the treatment of interest on debt.
• E) In the WACC calculation,we must adjust the cost of preferred stock (the market yield)to reflect the fact that 70% of the dividends received by corporate investors are excluded from their taxable income.

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Definitions:

Neuronal Communication

The process by which neurons transmit signals between themselves and to other types of cells, facilitating brain function and the regulation of bodily activities.

Executive Functioning

Refers to a set of cognitive processes that are necessary for the cognitive control of behavior, including attentional control, inhibitory control, working memory, and cognitive flexibility, as well as the planning and execution of tasks.

Hippocampus

A region of the brain that plays a major role in memory formation and spatial navigation.

Macular Degeneration

A medical condition which results in blurred or no vision in the center of the visual field due to aging, leading to damage to the retina and is a major cause of blindness and visual impairments in older adults.