Which of the Following Statements Is CORRECT

question 19

Multiple Choice

Which of the following statements is CORRECT?

• A) all else equal, an increase in a company's stock price will increase its marginal cost of reinvested earnings (not newly issued stock), rs.
• B) all else equal, an increase in a company's stock price will increase its marginal cost of new common equity, re.
• C) since the money is readily available, the after-tax cost of reinvested earnings (not newly issued stock) is usually much lower than the after-tax cost of debt.
• D) if a company's tax rate increases but the ytm on its noncallable bonds remains the same, the after-tax cost of its debt will fall.
• E) when calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are deductible by the paying corporation.

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Definitions:

Absolutism

A theory of ethics which requires that individuals defer to a set of rules to guide them in the ethical decision-making process. Whether an action is moral depends on whether it conforms to the given set of ethical rules.

Inflexible

Inflexible describes a lack or absence of flexibility; not open to change or adaptation.

Business Ethics

A field of study that examines moral principles and problems that arise in a business environment.

Situational Ethics

An ethical theory which holds that to evaluate the morality of an action, we must imagine ourselves in the position of the person facing the ethical dilemma and then, on that basis, determine whether that person’s action was ethical.