Which of the Following Statements Is CORRECT

question 89

Multiple Choice

Which of the following statements is CORRECT?

• A) the percentage flotation cost associated with issuing new common equity is typically smaller than the flotation cost for new debt.
• B) the wacc as used in capital budgeting is an estimate of the cost of all the capital a company has raised to acquire its assets.
• C) there is an "opportunity cost" associated with using reinvested earnings, hence they are not "free."
• D) the wacc as used in capital budgeting would be simply the after-tax cost of debt if the firm plans to use only debt to finance its capital budget during the coming year.
• E) the wacc as used in capital budgeting is an estimate of a company's before-tax cost of capital.

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Definitions:

Segmented Income Statement

A financial statement that separates the results of different business units, products, or segments to analyze each segment's profitability.

Contribution Format

An income statement format that separates fixed and variable costs, highlighting the contribution margin.

East Segment

A division or geographical area of a business focused on the eastern region, often used in reporting or segmenting operations.

Segment Margin

The profit generated by a particular segment of a business, after deducting direct and allocated expenses specific to the segment.