Which of the Following Statements Is CORRECT

question 39

Multiple Choice

Which of the following statements is CORRECT?

• A) The after-tax cost of debt usually exceeds the after-tax cost of equity.
• B) For a given firm,the after-tax cost of debt is always more expensive than the after-tax cost of non-convertible preferred stock.
• C) Retained earnings that were generated in the past and are reported on the firm's balance sheet are 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.
• E) The WACC is calculated using before-tax costs for all components.

---

Definitions:

Seller Receives

The net amount a seller is paid after all costs, taxes, and fees have been deducted from the gross amount received from the sale of goods or services.

Tax Levied

A core financial duty or diversely defined levy enacted on a taxpayer by a government branch to facilitate the financing of government and the wide array of public sector spending.

Seller Receives

The final amount a seller gets after transaction costs, taxes, or any deductions when a good or service is sold.

Taxes Levied

Charges imposed by governments on individuals or entities to fund government spending on public services and infrastructure.